For the first time since the North American Free Trade Agreement (NAFTA) came into effect in 1994, the trade pact will be given a second look by Canada, the U.S., and Mexico. Considering how much the economy has changed in the last couple decades, the question is: what took so long?
Most experts agree that we’re in for a tough battle, particularly with President Donald Trump’s “America First” agenda. U.S. and Mexico officials can only hope that Canadian Foreign Affairs Minister Chrystia Freeland won’t cry as she did during the CETA talks last year.
Ambitious discussions will ensue between Minister Freeland, U.S. Trade Representative Robert Lighthizer, and Mexican Economy Minister Ildefonso Guajardo. Senior U.S. officials told Reuters that all sides would begin their meetings in Washington by integrating proposed texts aimed at modernizing the agreement.
From the U.S. standpoint, American officials are trying to achieve a "more balanced, reciprocal trade agreement that supports high-paying jobs for Americans and grows the U.S. economy." Simply put: the U.S. wants to import less, export more, slash the deficit, and strengthen the “Buy American” mandate.
Some lawmakers on Capitol Hill, including Senator John McCain (R-AZ), urge the Trump administration to proceed with caution:
Along with the countless individuals in my home state and around the country who have benefited from NAFTA, I urge the administration to pursue an outcome that does not pick winners or losers, but further promotes the free flow of trade with Mexico and Canada that has and will continue to boost our economy.
But their counterparts may seek something different.
Speaking at the University of Ottawa on Monday, Minister Freeland explained a few of her objectives: making social justice a fundamental aspect of NAFTA, defending government-protected Canadian industries, and improving cross-border movement. The minister said in her speech:
Canadians broadly support free trade. But their enthusiasm wavers when trade agreements put our workers at an unfair disadvantage because of the high standards that we rightly demand. Instead, we must pursue progressive trade agreements that are win-win, helping workers both at home and abroad to enjoy higher wages and better conditions.
She also warned that Canada could walk away from talks if Washington insisted on eliminating specific mechanisms. Should the deliberations go awry, Prime Minister Justin Trudeau has said he would visit with Mexican President Enrique Pena Nieto in October to come to an arrangement.
Mexico is completely in favor of NAFTA; their manufacturing and agricultural sectors have become globally competitive. Mexican leaders will likely propose enhancing border infrastructure, merging the telecom markets, and simplifying migration rules for seasonal workers.
The U.S. and Mexico want a deal by early next year, likely for political reasons. Mexico has its presidential election in July 2018, and the U.S. has its mid-term elections in November 2018. Canada can take its time because its general election doesn’t take place until October 2019.
Ultimately, the primary objective for all parties involved is to boost commerce, according to a U.S. official speaking on the condition of anonymity:
In terms of the rules of origin, the overall goal is to address concerns about doing more to incentivize and create more manufacturing and more manufacturing jobs in the United States," said the official. "I think each country expects benefits for itself from those rules of origin, and I think that's what you're seeing reflected in our objective statement.
But is all this posturing necessary to make deals? If Minister Freeland, President Trump, and President Nieto want free trade, then they could agree on one thing: scrap the 1,700-page treaty and compose just one page. Of course, government-managed crony business needs hundreds of pages, but free trade does not.
Legendary free market economist Murry Rothbard explained the problem with NAFTA perfectly:
Yet Nafta is more than just a big business trade deal. It is part of a very long campaign to integrate and cartelize government in order to entrench the interventionist mixed economy. In Europe, the campaign culminated in the Maastricht Treaty, the attempt to impose a single currency and central bank on Europe and force its relatively free economies to rachet up their regulatory and welfare states.
In the United States, this has taken the form of transferring legislative and judicial authority away from the states and localities to the executive branch of the federal government. Nafta negotiations have pushed the envelope by centralizing government power continent-wide, thus further diminishing the ability of taxpayers to hinder the actions of their rulers.
A free market does not require politicians to banter back and forth, impose cronyism, and institute government agreements. The only thing needed for successful commerce is to eradicate artificial barriers. Here’s an example of how international deals should work: a U.S. businessman saunters into Mexico, purchases 10,000 pencils for $100, returns to the U.S., tipping his hat to the border guard, and sells them for $200. No politicians, no negotiators, and no cronyism required or desired. That, my friends, is free trade.
