In 1993, President Bill Clinton was pictured holding a Washington state apple while promoting the virtues of the North American Free Trade Agreement (NAFTA). That photo only underscored the importance of the agreement and our trade with Mexico and Canada.
Washington is the most trade dependent state in the nation. The Puget Sound Business Journal (PSBJ) reported last November, Washington state exported at least $134.5 billion worth of goods to Canada and Mexico since the agreement was signed.
The dust up over NAFTA focuses on Mexico from which we import more than we export. PSBJ figures Washington has 150,000 jobs depend directly on trade with Mexico which happens to be the world’s sixth largest exporter of aerospace parts to companies like Boeing.
NAFTA, negotiated under President George H.W. Bush and implemented by Clinton, eliminated most tariffs on traded goods between Canada, the United States and Mexico. It was designed to encourage economic integration among the three countries and thereby, boost the economic prosperity of all three.
In large part it has accomplished that goal. The Council on Foreign Relations reports trade between the three countries increased from $290 billion in 1993 to over $1 trillion in 2016.
States like Washington and Texas, the nation’s largest exporter, have benefitted. Texas, has more than a million jobs relying on exports, and Mexico accounts for roughly 37 percent of that total. Whereas, Washington’s exports to Mexico are heavy to agriculture, Texas sends mostly electronics, oil, gas and chemicals, and machinery south of the border.
The Business Insider recently reported NAFTA has been credited with helping the U.S. auto sector become globally competitive due to cross-border supply chains.
Midwestern auto workers don’t see it that way. They blame carmakers for abandoning plants and workers in states like Michigan and moving those factories and jobs to Mexico and China.
The frustration over trade agreements hit the boiling point during last year’s presidential campaign. Both socialist-leaning Vermont Sen. Bernie Sanders (D) and now President Donald Trump lambasted trade deals for killing American jobs and allowing companies to move to nations with lower wages and benefits; and, weaker worker protections and environmental regulations.
Trump called NAFTA “the worst trade deal in the history of the country” and confirmed his intent to renegotiate it since becoming president. That’s where the new president needs to exercise caution.
Trade agreements take years to negotiate and are carefully balanced. Scrapping NAFTA and imposing tariffs on Mexican and Canadian goods would likely trigger counter-tariffs imposed on U.S. products. The same goes for other international trade agreements.
While critics blame NAFTA for the loss of U.S. manufacturing jobs, decline in manufacturing employment started over 40 years ago as robots and automation replaced assembly line workers. However, it took a nose dive between 2000 and 2009, according to U.S. Labor Department statistics, and has rebounded slowly since. Roughly, six million U.S. factory workers lost their jobs in that nine year period.
NAFTA has benefitted agriculture, which is particularly good news for Washington farmers, ranchers and tree-fruit growers. According to the U.S. Trade Representative’s office, agriculture exports to Mexico have doubled and increased by 44 percent to Canada since 1993.
It is always good to take a look at existing trade agreements, especially in our rapidly changing world. Modifications to those treaties should be carefully planned and negotiated with our trading partners, not hastily imposed by administration fiat.
Trade is a two-way street and no country gets all it wants. Hopefully, there is a better deal for American workers by opening up NAFTA. President Trump just needs to be more measured in his rhetoric and methodical in our national approach.
Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.
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