The ‘fix’ isn’t in on NAFTA

In his column “Fixed Trade vs. Free Trade” ( Dec. 16, 2016), Lawrence Solomon, characterizes NAFTA as a “rigged” or “fixed” trade arrangement. He also finds NAFTA to be a determining factor behind the decline in U. S. manufacturing jobs. I disagree.

NAFTA eliminated tariffs on virtually all goods traded among the three NAFTA countries. Many of the agreement’s “thousands of pages” that Solomon refers to consist of lists of staging categories for the elimination of tariffs on different goods. These are irrelevant now as all tariff elimination has been fully phased in. I don’t see how across- the- board tariff elimination qualifies as “fixed trade” or “rigged trade,” other than with a few outliers like Canada’s supplymanaged goods to which prohibitive over access tariff rates still apply. It is through tariffs that trade is “rigged” and not through their elimination.

Some of the “thousands of pages” cover the product-specific rules of origin, which have to be satisfied if a product is to benefit from NAFTA tariff elimination. Some of these rules are manipulative, such as the automotive rules and the rules for textile and apparel goods. However, such manipulation as occurred was at the request of the U. S. negotiators to benefit U. S. producers. The automotive rules imposed tracing requirements that were designed to make the importation and use of non-NAFTA auto parts ( particularly those from Japan) more burdensome. The textile and apparel rules were designed for the benefit of U. S. textile producers because, unlike Canada and Mexico, the United States has a significant textile industry

NAFTA led to the elimination of some truly fixed or rigged trade regimes, most notably the Mexican Automotive Decree that was in effect when NAFTA was negotiated and that was designed to benefit Mexican- owned auto- parts producers. This regime has now been dismantled. The Mexican automotive industry has benefited from the dismantling of the Automotive Decree regime but this can hardly be called “fixed trade” or “rigged trade.”

Solomon states that U. S. manufacturing jobs plummeted by seven million between 1980 and the present and implies that this job loss was caused, if not entirely, then in most part, by NAFTA. He does not mention the effect of automation over that time period. In another National Post column, “Equalization for America” ( Dec. 20, 2016), Solomon’s colleague Stephen Gordon cites a study by Ball State University that concluded that seven out of eight of such job losses were caused by automation. Whether this is correct or not, any realistic appraisal of the effect of the trade agreements on manufacturing employment must take into account the effect of automation and the shift from using workers to using robots to manufacture goods. I suspect that Donald Trump’s promise to bring back manufacturing jobs through renegotiating or tearing- up trade agreements like NAFTA is empty, and t hat manufacturers won’t hire appreciably more U. S. workers no matter what he does with the trade agreements.

NAFTA is a big, messy agreement, with provisions relating to outliers such as agriculture, energy goods and textiles and apparel that are excessively complicated. However, I do not see NAFTA as “fixed” or “rigged” and I question the extent to which NAFTA has been a cause of the destruction of U. S. manufacturing employment, particularly given the existence of other obvious causes such as automation.

THE DEAL LED TO THE ELIMINATION OF SOME TRULY RIGGED TRADE REGIMES.