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 In December, Illinois Farm
Bureau President Richard Guebert discussed NAFTA in his presidential
address. He noted that the desire to update the current agreement
was “understandable and commendable,” but said, “Complete
withdrawal from NAFTA would decimate Illinois farmers as well as
rural America.”
The NAFTA agreement of today originated in 1994, and was put into
place gradually over the next 14 years. In 2008, the plan was
considered to be fully implemented, and its design was intended to
benefit the U.S. and Canada, but to also improve the economic status
in Mexico.
The theory, according to an
article published on the Council on Foreign Relations website by
James McBride and Mohammed Aly Sergie, the agreement was to improve
the economy in Mexico, provide new job opportunities in that
country, and thus reduce the number of Mexican citizens immigrating
into the United States. This was to be accomplished by implementing
free trade between the three countries without tariffs, which would
increase Mexico’s manufacturing industry and make their exports more
competitive in the marketplace.
However, opponents of NAFTA argue that the impact was just the
opposite. Because the agreement lifted tariffs on imports into
Mexico, the United Sates had a new customer for its products,
including agricultural products. The purchase of corn and soybeans
from the United States resulted in the drop of agricultural
production and Ag jobs in Mexico. Thus, Mexican farm workers
continued to cross the borders in order to find work, perhaps more
so than before NAFTA.
Prior to NAFTA, the United States and Canada had a two-party trade
agreement, so there was speculation that NAFTA would not do anything
to improve trade between those two countries. However, the results
belied speculation. After NAFTA, Canada to U.S. export dollars rose
from $110 billion to $346 billion annually, and U.S. to Canada
exports rose at about the same amount. What NAFTA was supposed to do
for Canada though hasn’t exactly worked out. The goal had been to
increase the productivity gap between the two countries and increase
jobs for Canadian’s. However, Canada’s productivity rate remains at
72 percent of the United States.
The NAFTA may have had the greatest impact on the U.S. economy, with
an estimated increase in exports by about $80 billion per year. It
also produced more export related jobs, approximately 200,000, and
an increase in the average pay levels of these jobs.
However, the downside to the NAFTA agreement was the absence of
tariffs and taxes that made it easier for U.S. manufacturers to
relocate to Mexico where labor was cheaper, thus making the profits
for those individual companies higher, without incurring any cost
for returning goods back to the U.S. for distribution.
The biggest down side to this is that now, U.S. blue collar workers
are losing jobs to Mexico, and the country is becoming lopsided with
the best employment opportunities to those with higher-education;
those without education are becoming a big portion of the nation’s
unemployment statistics.
In the article McBride and Sergie state, “The U.S.-Mexico trade
balance swung from a $1.7 billion U.S. surplus in 1993 to a $54
billion deficit by 2014. Economists like the Center for Economic and
Policy Research’s (CEPR) Dean Baker and the Economic Policy
Institute argue that this surge of imports caused the loss of up to
600,000 U.S. jobs over two decades, though they admit that some of
this import growth would likely have happened even without NAFTA.”
From January to the first
portion of March 2018, NAFTA seemed to be a hot topic in Washington,
with explosive tweets from the President that he would imposes taxes
on cars if Mexico put tariffs on steel and aluminum. The President
has even threatened to dissolve NAFTA altogether. But House Ways and
Means Chairman Kevin Brady says that is not going to happen. On
March 6th Brady said that there was good progress being made on
NAFTA, and that the United States would not “scrap NAFTA.”
Since that time there has been little said about NAFTA, and it
appears that the president has turned his attention on China and
imposing tariffs there on goods sold to the United States.
So what is to become of NAFTA? Writer for the Council on Foreign
Relations Shannon K. O'Neil says the agreement has some specific
timelines to meet IF it is to be changed.
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O’Neil notes, “On July 1, Mexican citizens will elect a new
president and more than 3,000 officials, including every member of
the House of Representatives, a third of the senators and eight
governors. In this highly contested set of races, the economic model
of the last 30 years, of which NAFTA is an integral part, is in
effect on trial.
That makes the timing of any announced compromise on NAFTA tricky. A
resolution before the election opens the ruling Institutional
Revolutionary Party and its presidential candidate Jose Antonio
Meade (lagging third in the polls) to broadsides from every
direction, with every other aspirant sure to boast they could have
gotten a better deal. Trump will aid these critiques, undoubtedly
crowing about his huge win over Mexico, a country that until he came
along was ‘killing us on jobs and trade.’”
Even if the agreement would come to pass before the Mexico election,
then there is the possibility, even probability that the entire
process and progress made thus far will be scrapped and negotiations
would begin again with a new set of lawmakers in Mexico.
If that does happen, no one can even guess how long it might take to
re-negotiate the re-negotiations. BUT….O’Neil speculates that NAFTA,
could drag out long enough that Trump and his opposing candidates
could use the agreement as a portion of the 2020 presidential
election platforms.
O’Neil offers the following explanation:
Even if today’s Mexican negotiating team
approves a new NAFTA, tomorrow’s Mexican Congress may not. A July
announcement all but pushes the ratification in Mexico to this new
body, which will take its seats September 1 (followed by the
President’s inauguration three months later). A victory by current
front-runner Andres Manuel Lopez Obrador, a leftist who has already
called on the government to stop negotiations and wait for
(presumably his) new administration, could make the new legislature
less likely to rubber stamp any agreement reached by the preceding
administration.
A July announcement also runs into the U.S. electoral calendar.
Under current Trade Promotion Authority (which needs to be renewed
in July), after reaching an accord U.S. negotiators need to wait
least 90 days before officially signing. This waiting period is
extended to 180 days if negotiators have made changes to how trade
remedies work (which is likely). Then, before bringing it to a vote
in the Congress, they need to wait up to another 105 days for an
International Trade Commission study on the effects on the U.S.
economy. That would put passage in the hands of a new Congress -
which could be Democratic, at least in the House.
If the original NAFTA fights are any guide, a Democratic-led House
would require significant changes before approving a Trump-led bill,
pushing passage deep into 2019. And in the face of Democratic
opposition, Trump himself might want to keep the NAFTA drama going,
using it as a platform for his 2020 reelection campaign.
O’Neil’s article wraps up with a summation that after all the talks,
all the working groups, and the thousands of hours invested, the end
result may very well be nothing. She adds that what does go right in
this scenario is that those who benefit from the current NAFTA may
stand up and defend it more vigorously than in the past when the
agreement was not in the foreground of politics.
She offers the best conclusion saying, “But what all the talks and
tensions have done is to rally NAFTA's once passive beneficiaries to
its cause. Which means that NAFTA, whether old or new, will likely
continue,” and U.S. grain sales to Mexico will continue.
[Nila Smith]
NAFTA's Biggest Challenge May Come After the
Deal
NAFTA’s Economic Impact
IFB members re-emphasize support of NAFTA
FarmWeekNow.com
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