NAFTA's doom, and why that might be a good thing
June 10th, 2018
On Tuesday, May 29th, several less-than-diplomatic actions may have pushed the renegotiation of the North American Free Trade Agreement, or NAFTA, to the point of no return. This already fragile situation has been mangled by the White House’s retaliatory taxes on aluminum coming from Canada and Mexico, in addition to President Trump’s tweets that his negotiations with Canada and Mexico on this issue were “UNFAIR,” calling it “Stupid Trade!” Such actions, rather than provoking movement on this subject, have been counterproductive, causing Canadian Prime Minister Trudeau to cancel a trip to the U.S. Many on both sides of the political aisle are unhappy with this situation; I, however, am pleased. I think the president’s heavy-handed, incompetent attempt to remediate NAFTA’s terms will lead to its termination, something I believe would be highly beneficial for our country.
But before we look to the future, let’s look back at NAFTA’s history. Signed into law by Bill Clinton in 1994, NAFTA is an agreement between the U.S., Canada, and Mexico prohibiting tariffs, a type of tax on goods and labor which have crossed country lines. It is, at its core, a manifestation of laissez-faire capitalism, the theory that there should be no regulation on the transfer of goods or labor so that the market is the sole party dictating the economy. This agreement, proclaimed bipartisanly to be a job-creating, economy-strengthening victory, has in fact triggered the exact opposite, decreasing wages and employment for U.S. workers across the nation. U.S. corporations are incentivized by cheap labor and a lack of tariffs among the countries of NAFTA to outsource their hiring, leading to fewer qualified U.S. citizens being employed to perform the same tasks, in turn redistributing work and wages to the low-wage economies of Mexico and Canada. This is why the U.S. has lost 1 million jobs under NAFTA; this is why wages in the U.S. manufacturing sector are essentially unchanged over the past 35 years, despite productivity increasing by over 200%. Outsourcing under NAFTA has contributed greatly to widening the vast gap that exists between the economic classes in this country. While companies refuse to hire the poor working class because of NAFTA’s influence, the rich, whose companies are making millions off this outsourcing, are only getting richer.
President Trump’s strong-arm tactics will hopefully work against him and prompt Prime Minister Trudeau and President Nieto to withdraw from NAFTA and reverse this issue. Without NAFTA, tariffs will again be levelled on transfers of goods and services between the U.S., Mexico, and Canada. These tariffs discourage U.S. companies from outsourcing to Mexico and Canada for cheaper labor. Thus, many companies will relocate production to the United States to avoid paying them, which will support companies making goods in America, thus creating more American jobs. Moreover, providing new jobs also raises wages: just three months ago, when the U.S. government added 313,000 jobs, wages went up an average of 2.6%. In this light, withdrawing from NAFTA will almost certainly raise wages for American workers with the many thousands of jobs it provides.
Contrary to these facts, the primary defense that proponents of NAFTA provide is that withdrawing from NAFTA would hurt the United States by damaging its economy. They claim that without NAFTA, tariffs on goods in the U.S. would rise to an average of 3.5%, which would cut into company profits; instead of putting that money to work in the U.S. economy, it would be siphoned off in the form of unnecessary tariffs by the governments of Canada and Mexico.
This defense, however, relies on the premise that the economy is of utmost importance in the U.S. In reality, this is a faulty lens through which to examine NAFTA. While the economy is a very abstract concept based on the collective success of multibillion dollar corporations, a more concrete and crucial factor at which to look is the wellbeing of American citizens. As a whole, American citizens will benefit from leaving NAFTA. Yes, the CEOs and investors of U.S. corporations would be hurt, but they only make up the one percent. On the other hand, those benefited by withdrawal from NAFTA are the workers who get higher wages and more jobs: the ninety-nine percent.
Moreover, this defense explains why President Trump is so adamant upon renegotiating NAFTA. He’s in the one percent himself -- NAFTA directly benefits his own financial wellbeing; he’s even renegotiating it to be more in his favor. With all hope, though, his heavy-handed incompetence will lead to NAFTA’s dissolution and thus the betterment of the American working class -- some of the most vulnerable people in our society.