Trade Compliance

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Reckoning the Cost of NAFTA Failing

Posted November 23, 2017

For an administration that has consistently lagged far behind the last five of its predecessors in staffing up government positions, it may not come as much of a surprise to learn that in its rush to “Make America Great Again,” the Trump White House didn’t bother undertaking any basic research examining the economic impact of actually terminating the North American Free Trade Agreement, even as the president was threatening to abruptly pull the plug on a deal that today governs more than $1 trillion in annual trade.

In fairness, as reported by the press, “that absence of research applies to both elected branches of the U.S. government: neither the White House nor congressional researchers have an impact assessment, despite uncertainty over the fate of the 23-year-old pact.”

The lack of analysis at the top levels of the U.S. government is in stark contrast to relentless lobbying efforts made by Canada over the last year through a comprehensive “charm offensive” carried out by a small army of federal and provincial officials that have been tirelessly hitting the road to raise awareness among lawmakers and pro-trade American business groups about the economic significance of NAFTA to a large number of U.S. states that rank Canada as their leading export market or trading partner.

Rushing to address the shortage of information in the United States about the economic consequences of a reckless withdrawal from NAFTA, another new study on the subject, this time issued by the U.S. Chamber of Commerce, found that Michigan, Wisconsin, North Dakota, Texas and Missouri were among the 12 states it said would suffer the most “severe” impacts to jobs and economies if Trump decides to pull out of the trade agreement. Other big losers would include Iowa, Arizona, Nebraska and North Carolina, said the group.

“Ironically, those likely to suffer most would be Midwestern industrial states, heartland farm states, and border states like Texas and Arizona — nearly all of which voted to elect President Trump,” said John Murphy, the Chamber’s senior vice president for international policy.

Previously, the Chamber decried a series of proposals tabled by the U.S. in the fourth round of the NAFTA talks as “highly dangerous,” warning that any one of the inflammatory and clearly one-sided demands had the potential to torpedo the deal as a whole and lead the United States to “an economic and political debacle.”

Culling data from the American Enterprise Institute and Center for Automotive Research, the Chamber analysis found that NAFTA’s demise could put 366,000 jobs in Michigan at risk and affect the $35 billion worth of exports the state sends to Canada and Mexico.

Also cautioning about the potential harm that would be caused by scrapping NAFTA, business groups representing farmers, automakers and railroads and various other sectors that depend heavily on free trade with Canada and Mexico have claimed that removing the competitive advantages provided by the decades-old trade pact would have far-reaching, negative effects for consumers, the auto industry, freight carriers, agricultural producers, and much of the U.S. manufacturing base the administration is supposedly aiming to protect.