Julio-César Chávez for the Rivard Report
It’s been eight long weeks since the North American Free Trade Agreement (NAFTA) renegotiations kicked off. It was an ambitious agenda for a short period of time, from incorporating the energy and e-commerce sectors to pushing for higher labor and environmental protections.
Yet four rounds of negotiations later, and the hopes of bringing the 25-year-old agreement into the 21st century are looking increasingly slim.
At this point, successful negotiations may simply mean NAFTA’s existence when this all ends, and fond memories of a missed opportunity to have done more. To truly understand what’s going on, it’s worth revisiting how we got here.
During the campaign period, then-presidential candidate Donald Trump made countering trade a tenet of his platform, singling out NAFTA as the “worst deal ever” and accusing Mexico of taking advantage of its northern neighbor. In the Oval Office, his tone has remained largely unchanged. Even as Trump’s team began establishing the renegotiating framework for NAFTA, the President never seemed to be sold on the idea.
In the leaked call between President Trump and Mexican President Enrique Peña Nieto, he made it clear that he was coaxed into the negotiations and was by no means convinced of their utility.
For most economists and trade analysts, this lax approach toward scrapping NAFTA appears to verge on the irrational. Most agree that the agreement could use an update, but this language is almost always wrapped in a recounting of NAFTA’s virtues: the rising U.S. exports, lower prices for consumers, and the 14 million jobs that it underpins across the United States. Industry executives will also echo this sentiment, with their supply chains weaving back and forth across the continent. At first glance then, it could feel remarkable that a president would review those same graphs, skim those same articles, and still feel no qualms about withdrawing.
Except it’s rational – sort of.
Ultimately, it comes down to what Trump is choosing to maximize: short-term politics or the longer-term health of the economy. And with each threat of withdrawal or deliberate destabilization, it’s becoming clear that Trump’s priority lands squarely on the political side. Attacking NAFTA during negotiations is clearly about short-term politics, fanning the flames of a subset of the population that views trade with Mexico not as a set of neat charts of imports and exports, but as intertwined with vaguer concepts of globalization, immigration, and fairness.
It’s not that Americans dislike trade; in fact, most believe it’s a good thing for the country, including more than six out of 10 Trump supporters. But each day it’s becoming more clear that the issue is not always trade itself, but also with whom we trade. For many, Mexico is the villain.
For decades, cheap political points have been scored by accusing Mexico of ripping off U.S. workers and stealing their jobs, and images abound of Mexicans getting rich off Americans’ empty factories. It is in this context, where feelings of unfairness and anger loom larger than statistics and models – no matter how accurate or inaccurate – that bilateral trade becomes decoupled from economic reality. This makes economic policy depend more on its political reception than on the substantive, a confusing balancing game for negotiators and the economic partners of the U.S.
All this is to say that we have two divergent objectives playing out simultaneously. Trump is maximizing short-term politics while NAFTA negotiators are working away – or engaging in tense stalemates – ostensibly to improve the technical side of the agreement, thus improving upon the region’s competitiveness and ability to create jobs and prosperity. In the tug of two divergent poles, the U.S. is running the risk of completely pulling apart NAFTA and the economic system that it has fostered, and in the process, endangering our ability to lead economically, in the hemisphere and around the world.
With the negotiations stalling, it’s time to be honest with ourselves that this is not just a problem of finding a compromise. This is a story about an administration that sees no political benefit in negotiating NAFTA in good faith, and doesn’t value economic reality.
As the president might tweet: “So sad. So pathetic.”