By Matthew Rusling
WASHINGTON, Jan. 27 (Xinhua) — The U.S. opinion is divided over whether U.S. President Donald Trump’s plan to renegotiate a North America free trade deal will bring back jobs to the U.S. as promised.
Making good on his campaign promises, Trump earlier this week announced his decision to renegotiate the North American Free Trade Agreement (NAFTA) that the U.S. signed with Mexico and Canada in 1994.
Trump dismissed NAFTA as one of the worst trade deals the U.S. ever signed because it hurt the U.S. manufacturing industry and killed a lot of jobs in the U.S.
But U.S. economists have disagreements over the benefits and drawbacks of NAFTA, and some contend the trade deal has indeed harmed American workers.
“By establishing the principle that U.S. corporations could relocate production elsewhere and sell back into the United States, NAFTA undercut the bargaining power of American workers, which had driven the expansion of the middle class since the end of World War II, according to a 2013 Economic Policy Institute (EPI) report.
“The result has been 20 years of stagnant wages and the upward redistribution of income, wealth and political power,” the report found.
It claimed the trade deal caused the loss of some 700,000 jobs as production moved to Mexico and strengthened the ability of U.S. employers to force workers to accept lower wages and benefits. Once NAFTA was signed, U.S. corporate managers started telling workers the companies would move to Mexico unless workers accepted wage cuts.
Indeed, NAFTA opponents note that the official U.S. jobless number, which hovers around the 5 percent mark, is an artificial number, as it only considers those who are actively seeking work. The figure does not take into consideration the millions of Americans who have given up looking for full-time work due to sheer frustration at the lack of prospects.
However, EPI also said that U.S. and Mexican supply chains are so intertwined that just scrapping NAFTA could cause widespread unemployment and a drop in living standards.
Robert E. Scott, senior economist at EPI, told Xinhua that there’s no question that the U.S. has developed tightly integrated supply chains with Mexico and Canada, and any efforts to undo those or substantially change them “is going to be very costly in terms of reduced output.”
Diane Swonk, a veteran independent economist, told Xinhua that it’s too early to tell whether Trump’s renegotiation of NAFTA will help or hurt jobs in the United States.
“The key issue is the supply chain and how integrated it now is. The Dallas Fed argues that 40 cents on the dollar on imports from Mexico is actually U.S. content. That means that any disruption to inflows of imports to Mexico would also quickly disrupt production in the U.S.,” Swonk said.
The U.S. steel, trucking and rail industry are also highly dependent on trade with both Mexico and Canada, she said.
“TPP would have provided much needed upgrades to the agreement,” she added, referring to the Trans-Pacific Partnership, a trade deal that would have given a dozen nations preferential access to U.S. markets. Trump also killed that deal earlier this week, describing it as bad for U.S. workers.
The uncertainty factor, however, is too high to say whether it will help U.S. workers given the rhetoric so far, Swonk said.
Some have billed Trump’s outlook on trade as protectionist. In a USA Today editorial published earlier this week, the newspaper called Trump’s rhetoric about NAFTA “way over the top,” noting Trump’s comment that the agreement is “the worst deal maybe ever.”
Indeed, according to the U.S. Census, exports to Canada are an annual 312 billion U.S. dollars annually, and USA Today noted that the number dwarfs U.S. exports to all European Union nations combined. Exports to Mexico stand at around 240 billion U.S. dollars annually.
USA Today contended that the two U.S. neighbors are not simply going to allow U.S. goods to enter tariff-free if the U.S. scraps NAFTA, a pact that puts no tariffs on goods moving between the United States, Canada and Mexico.
