U.S. President Donald Trump has announced that he will soon begin negotiations on the NAFTA Free Trade Agreement with the neighboring states of Mexico and Canada. He will meet with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto. He also intends to withdraw from the TTP Free Trade Agreement.
Today, Sean Spicer, in the first official White House Press Briefing of the Trump administration, explained that President Trump is looking forward to backing out of these trade deals, and renegotiating all trade deals moving forward.
Specifically, Spicer explained that the reason these trade deals have not worked historically is because they have been multilateral deals in which all countries participating are given equal footing in trade. However, countries much smaller than the U.S. reap the biggest benefits from such deals as their share of the benefits is proportionally much greater. This means all deals were established at the lowest common denominator.
Spicer explained that from now on President Trump wants to negotiate unilateral trade deals, with any country, one country at a time. In so doing, the trade deal will ensure that suitable benefits are reaped by all parties included. This represents a reversal of approximately 30 years of international trade policy.
NAFTA on the Chopping Block
As promising as NAFTA seemed in the planning stages towards the end of the last century, its growth came with costs. NAFTA has been criticized for losing 500,000 American jobs, lowering U.S. wages, and increasing the U.S. trade deficit.
NAFTA cost American jobs because factories moved to Mexico to save labor costs. The worst hit were the states of California, New York, Michigan and Texas. They had the most jobs related to motor vehicles, textiles, computers, and electrical appliances. Those were the kind of manufacturing-intensive industries that found it too tempting to resist – so they moved to Mexico.
Furthermore, the difference in the value of currency – a big problem with the concept of free trade agreements in the first place – meant that lower wages in Mexico also had a ripple effect that reduced U.S. wages and benefits. That is because workers in the remaining U.S. factories had lost their bargaining power. In other words, companies could now threaten to move to Mexico if labor unions negotiated too hard.
Finally, because the Mexican Peso is worth so much less than the dollar, it is not advantageous for Mexicans to buy American imports. Therefore, the trade deficit between Mexico and the U.S. soared. Simply in terms of U.S.-Mexico economic relations, NAFTA was a lose-lose-lose for America.
There is already an appointment for a meeting with Peña Nieto; It is expected in the White House on January 31st. A visit to Trudeau has not yet been officially announced.
President Trump, who was sworn in last Friday, is responsible for the transfer of jobs from the US to Mexico, for example in the auto industry. During his election campaign, he had announced that he would re-negotiate the free trade agreements that entered into force in 1994. He wants to achieve better conditions for the US. If there is no agreement, Trump will cancel the agreement.
According to the NAFTA Statutes, one contractor can indicate to others the intention to terminate the agreement. Then begins a 180-day phase of renegotiations. If no agreement is reached, the contract is terminated.
Mexico and Canada have agreed to discuss the free trade agreement NAFTA with future US President Donald Trump. “I think it is important that we are open to talks about trade agreements,” said Canadian Prime Minister Justin Trudeau in Ottawa. Mexico’s Foreign Minister Claudia Ruiz Massieu stressed that her goal was a modernization and not a renegotiation of the Treaty.
“If the Americans want to talk about NAFTA, I am more than happy to talk about it,” said Trudeau. It is important to see how workers and citizens in both countries get more advantages and how economic growth can be increased. Trudeau had telephoned Trump on Wednesday and congratulated him on his election victory.
Mexican Foreign Minister Ruiz Massieu told CNN on Wednesday evening that NAFTA had given the three countries “great success”. However, the agreement could be made even more beneficial for the States involved. “We are ready to talk about this with the new US government and also with Canada,” said Ruiz Massieu. She said that she did not wish to renegotiate the agreement concluded 22 years ago. Rather, it should be considered “whether we should modernize it”.
Although Canada and Mexico are prepared to renegotiate the terms of NAFTA, the tenor of Trump’s rhetoric has met with opposition among liberals in many countries. For example, in Germany, SPD faction leader Thomas Oppermann said he had found the nationalist inauguration speech of the new president repugnant. The CDU Foreign Minister Jürgen Hardt also spoke of “unconcealed nationalist tones” in Trump’s inaugural speech.
In Asia, too, concerns are being raised that Trump is restricting free trade, as plans to abandon the Trans-Pacific Partnership (TPP) agreed in 2015, draw near. Trump has roundly denounced the agreement between the US, Australia, Japan, Mexico and eight other countries in the election campaign as a “disaster” and “rape of our country”. Japan has already made it clear not to re-negotiate TPP. China – which is not TPP – could be the beneficiary.
The People’s Republic hopes to compete with the agreement. It wants to counter a Free Trade Area of the Asia Pacific (FTAAP) and the Regional Comprehensive Economic Partnership (RCEP) – without the participation of the USA. On the way out, President Barack Obama was actively hoping for a successful conclusion that would keep the TTP active. “Congress should take advantage of the Transpacific Partnership,” said White House spokesman Josh Earnest.
This is the difference between the outgoing administration and the incoming one: TTP was a taken for granted part of establishment life before. But, now it is out, yesterday, a has been. Oddly, the arguments for keeping TTP active were that America would become free of import taxes. This is the kind of backwards thinking that got us in themes we are in. The idea that another free trade deal would lessen the load on our trade deficit is the kind of negotiation tactics the fox uses on the chickens in the hen house.
In addition to NAFTA, the meeting with the Mexican president is also about immigration. Trump had repeatedly promised in the election campaign to build a wall on the border with Mexico, which the neighboring country would pay. Mexico rejects this.
In his candidacy on Friday, Trump reaffirmed the new guideline, which would determine the policy of his term. Under the motto “America First”, Trump announced a strengthening of the nation-state through protectionist economic policies and securing the national borders.
AfD CEO Frauke Petry, on the other hand, described Trumps as a role model for Europe. She said on Saturday in Koblenz, in the US Trump had shown a way out of a dead end – and “just as we do for Europe”.
The right-wing populist for the Republicans repeatedly fought in the election campaign against free-trade agreements, which the US was supposed to be swept over. With this message, he particularly scored among workers in the former Midwest industrial centers, which are responsible for the NAFTA agreements concluded with Mexico and Canada in 1994 for the transfer of jobs abroad.