Trump’s needless war on NAFTA
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bad trade deals was a main theme of President Donald Trump’s campaign, and he seems to mean business: Not only has he withdrawn the U.S. from the Trans-Pacific Partnership, but he also confirmed his intention to renegotiate the North American Free Trade Agreement.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.