Unforced error: Trump’s plan to kill NAFTA isn’t good for anyone

Pulling out of free trade deal with Canada and Mexico would do "significant damage" to global economy.

Of all the trade deals he lambasted on the campaign trail as threats to American workers, Trump reserved particular scorn for one: The North American Free Trade Agreement. Five days of talks aimed at overhauling NAFTA begin Wednesday, Aug. 16, 2017, in Washington, with negotiations to follow in Mexico and Canada. CREDIT: AP Photo/Evan Vucci
Of all the trade deals he lambasted on the campaign trail as threats to American workers, Trump reserved particular scorn for one: The North American Free Trade Agreement. Five days of talks aimed at overhauling NAFTA begin Wednesday, Aug. 16, 2017, in Washington, with negotiations to follow in Mexico and Canada. CREDIT: AP Photo/Evan Vucci

Donald Trump is still threatening to walk away from the North American Free Trade Agreement (NAFTA), adding to a long list of policies the president is undoing.

The 1993 agreement between the United States, Mexico, and Canada promised to increase trade and promote job growth for all three partners. Trump reportedly won’t even “be in the room negotiating,” but he has remained firm in his desire to “overhaul” or “terminate” the agreement and criticized Mexico and Canada for being “very difficult.”

Experts ThinkProgress spoke to seem to disagree with Trump’s take on the agreement, however.

“No, they’re being sovereign nations. They’re going to negotiate in their interests,” said James Dickmeyer, North American Competitiveness Fellow at the Wilson Center, when asked if Canada and Mexico are, indeed, being difficult.

“The thing is that the integration that’s occurred put a lot of our interests lined up, jointly,” said Dickmeyer, who served as a diplomat in six countries (including Canada and Mexico). He said that Canada and Mexico came to the negotiating table with very positive attitudes, recognizing that a 23-year-old trade deal will need to be updated.

Trump can, in theory, with six months’ notice, kill the deal — or, at least, signal that he’d like to kill the deal. His legal authority might be questioned and there might be congressional push-back, since NAFTA was approved by Congress. Legally speaking, this would be new ground.

As Jon Johnson, an advisor to the Canadian government during the NAFTA negotiations, wrote:

Can the president unilaterally cause the US to withdraw from NAFTA or must Congress agree? Congress must concur because the president and Congress have joint authority over trade agreements. However, unless Congress actively resists a presidential attempt to unilaterally withdraw from NAFTA, the US courts will not intervene, underscoring the importance to Canada of working closely with Congress.

NAFTA’s significance is debated among economic experts. But Canada is the largest market for U.S. exports. Although there was a slight dip in 2015, according to the Office of the United States Trade Representative (USTR), U.S. exports to Canada are up by 218 percent since 1993. And the second largest export market for U.S. goods? That would be Mexico –where an awful lot of U.S. agricultural goods are sold.

Russell Green, the Will Clayton Fellow in International Economics at Rice University’s Baker Institute for Public Policy and a former U.S. Treasury Department official, told ThinkProgress that while most of the value from NAFTA was gained in its early days, it’s still a deal worth keeping.

Who is in the negotiating room: U.S. Trade Representative Robert Lighthizer, left, shakes hands with Mexico's Secretary of Economy Ildefonso Guajardo Villarreal, accompanied by Canadian Foreign Affairs Minister Chrystia Freeland, at the start of NAFTA Renegotiations in Washington. CREDIT: AP Photo/Jacquelyn Martin
Who is in the negotiating room: U.S. Trade Representative Robert Lighthizer, left, shakes hands with Mexico’s Secretary of Economy Ildefonso Guajardo Villarreal, accompanied by Canadian Foreign Affairs Minister Chrystia Freeland, at the start of NAFTA Renegotiations in Washington. CREDIT: AP Photo/Jacquelyn Martin

“There’s no way that it deserves to be called the worst deal in history. There’s a lot of value there in terms of facilitating and increasing trade in all three countries,” said Green.

Getting rid of NAFTA might not be a large blow to U.S. GDP, but U.S. businesses in the automotive, electronic, and agricultural industries would take a hit, he said.

“It would be a mistake to abandon NAFTA – economically, there would be no gain, and quite possibly, there would be significant damage to global economic momentum,” said Green. “The biggest blow would be to global business confidence. [Ending NAFTA] would be a very significant anti-business, anti-trade measure.”

Already, some investors – or as Dickmeyer refers to them “the canaries in the coalmine” — are holding back in some sectors while the fate of NAFTA is decided. And fewer investments could mean more job losses.

Dickmeyer said it’s hard to measure exactly how many jobs have been lost and gained in the United States as a result of NAFTA. The Trump administration claims that 700,000 U.S. jobs went to Mexico, while the Commerce Department estimates that owing to the increase in exports, the United States in fact gained 1.8 million jobs.

“What’s really important is this: Look at the major companies, and even some of the smaller companies, that in the public comment period that USTR held – there were 21,000 comments. Yes, there were some complaints, but by and large, most were saying ‘Improve it [NAFTA] or keep it, but don’t kill it,'” said Dickmeyer.

“Look at automobiles, for example – one can argue that American manufacturing lost jobs to Mexico in the automobile area because of certain factories being set up in Mexico over the course of the past 20 some years of NAFTA. But if you talk to auto execs jobs were going to go somewhere else anyway,” said Dickmeyer. “These were making automobiles where labor cost was a higher percentage and lower-skilled labor could put them together. So if they hadn’t gone to Mexico, they would have gone somewhere else.”

Because NAFTA allows for the integration of supply chains, Dickmeyer said that a car made in Mexico might have 40 percent U.S. parts. “That might not happen if Ford decides to build that car… somewhere in Asia.”

Taking the long view, allowing some jobs to go to Mexico might not be the worst thing – more jobs means more economic stability. Additionally, Dickmeyer says the country is also an emerging market with a growing middle class, which means more consumer spending.

“Having actually lived through a lot of the negotiations in my professional life as a diplomat, it’s inconceivable to me that he would throw it away, because there are so many interest groups, so many points of political influence within the U.S. that would feel a loss if NAFTA were to be ended.”