Trump’s need­less war on NAFTA

The Hamilton Spectator - - OPINION -

This edi­to­rial ap­pears on Bloomberg View:

Hos­til­ity to sup­pos­edly bad trade deals was a main theme of Pres­i­dent Don­ald Trump’s cam­paign, and he seems to mean busi­ness: Not only has he with­drawn the U.S. from the Trans-Pa­cific Part­ner­ship, but he also con­firmed his in­ten­tion to rene­go­ti­ate the North Amer­i­can Free Trade Agree­ment. His ex­act plans for NAFTA, how­ever, aren’t clear.

NAFTA could stand some im­prove­ment. The prob­lem is that ev­ery way to make it bet­ter would, from Trump’s point of view, make it worse. That’s why his ap­par­ent sin­cer­ity is so dis­turb­ing.

Amer­ica’s trade pact with Mex­ico and Canada re­shaped all three economies, cre­at­ing a highly in­te­grated and com­pet­i­tive eco­nomic zone. The ev­i­dence is clear that, in the ag­gre­gate, this helped Amer­i­can work­ers — and not just be­cause NAFTA and other free-trade agree­ments make goods cheaper and pro­mote U.S. ex­ports. A sub­tler point is equally im­por­tant: When a U.S. firm takes ad­van­tage of NAFTA by mov­ing jobs abroad, those in­vest­ments spur de­mand for work­ers at home.

This sur­pris­ing and lit­tle-un­der­stood ben­e­fit isn’t the­o­ret­i­cal spec­u­la­tion. On aver­age, the ev­i­dence shows, when U.S. man­u­fac­tur­ers cre­ate 100 new jobs in Mex­ico, they cre­ate roughly 250 new jobs at home. U.S. man­u­fac­tur­ing em­ploy­ment has de­clined — but, as one study of NAFTA puts it, more man­u­fac­tur­ing jobs are lost from com­pa­nies that don’t in­vest abroad. When U.S. com­pa­nies build for­eign plants, they not only hire more U.S. work­ers, they also in­vest and spend more on re­search and de­vel­op­ment — at home.

A true “Amer­ica First” trade pol­icy would com­bine help for the vic­tims of dis­rup­tion with ef­forts to pro­mote, not re­strict, in­ter­na­tional com­pe­ti­tion and im­prove U.S. com­pet­i­tive­ness.

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