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NAFTA in the Trump Era

Should the U.S. withdraw from what President Trump has identified as the “worst trade deal ever signed”?

The North American Free Trade Agreement (NAFTA), a trade agreement signed between Mexico, Canada, and the United States in 1994, has been a controversial topic lately, after President Trump expressed his intention to withdraw from the treaty.

NAFTA has increased American exports and made products cheaper for American consumers, but also led to a decrease in American manufacturing jobs. The American cotton industry, for example, has benefitted greatly from NAFTA. According to a Wall Street Journal article, U.S. cotton farmers worry President Trump’s anti-trade policies will close off a major market for them. Close to 11 percent of American cotton exports go to Mexico, and nearly all of Mexico’s cotton imports come from the U.S.

According to an article by The Economist, trade agreements have brought more choices and lower prices for American consumers. Because of NAFTA and trade with China, clothes today cost about the same as they did in 1986. Supporters of NAFTA also point to the negative consequences that increasing tariffs on imports from abroad would have on consumers. Poor Americans would be disproportionately affected by the tariffs, according to a brief by the National Foundation for American Policy, since they buy many low-cost imported products.

Among the most negatively affected by NAFTA are American auto-workers. According to Bureau of Labor Statistics numbers, U.S. employment of auto-workers fell by a third between 1994 and 2013. In contrast, Mexico has experienced a large increase in auto-worker employment. The negative effect on American manufacturing jobs is the main reason for President Trump’s repudiation of the agreement.

Graph: American manufacturing jobs from 1994 to 2017. (Source: U.S. Bureau of Labor Statistics)

Job loss in manufacturing has made NAFTA unpopular among American trade unions. Bob King, former president of the United Automobile Workers, criticized NAFTA in a 2013 NPR article for failing to create good, middle-class jobs in the US. King argued that the jobs brought in by NAFTA are mostly “temporary, part-time jobs,” and that NAFTA has been a disaster.

President Trump said on February 13th that the U.S. has a “very outstanding trade relationship with Canada,” at a meeting with Canadian Prime Minister Justin Trudeau. He stated that he looks forward to tweaking American trade relations with Canada in a way that will benefit both countries. Mr. Trump is more concerned by American relations with Mexico, which he considers unfair. These different attitudes towards the two countries signal that Mr. Trump could seek separate trade negotiations with both Mexico and Canada, leading to the end of any free trade agreement between North America.

 

(Image Courtesy of AP Photo/J. Scott Applewhite)

Javier Madrazo

About Javier Madrazo

Javier is a freshman from Mexico City majoring in economics. He likes photography, the Steelers, and watching Seinfeld.

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