While Donald
Trump dislocates his shoulder slapping himself on the back for, as he himself
has put it, “dismantling NAFTA,” he has also implied that all trade woes are the
machinations of “the Democrats” and would like for us to believe that what will
replace NAFTA is a brilliant economic stroke only he could provide.
The above
statement is factual. The reality of the situation, on the other hand, is quite
different. Trump has characterized NAFTA
as bad economic policy which hurts American businesses, when in fact what jobs
have been lost are relatively low paying jobs, and the beneficiaries of moving
assembly to Mexico (primarily) have been Trump’s friends in the heavy industry
and manufacturing sector. Moving assembly jobs to Mexico benefits those who
profit from automobile and electronics sales.
Similarly,
Trump has repeatedly implied that we have trade deficits with both NAFTA
signatories. He does not count trade in services, which include, among other
things, telecommunications, accounting and legal services, and tourism. Services
are increasingly a large part of U.S. trade and, in fact, it may be
undercounted because economists have not figured out how to accurately
measure digital trade, where the United States is the world leader.
As the 2018 CEA report which, one should note, was signed by Trump, put it, “Focusing only on the trade in goods alone ignores the United States’ comparative advantage in services.” But then, that’s what this president does, isn't it - ignore inconvenient truths? When he said the minimum was $17 billion, he is referring to a deficit in merchandise goods only in 2017 between the United States and Canada.
As the 2018 CEA report which, one should note, was signed by Trump, put it, “Focusing only on the trade in goods alone ignores the United States’ comparative advantage in services.” But then, that’s what this president does, isn't it - ignore inconvenient truths? When he said the minimum was $17 billion, he is referring to a deficit in merchandise goods only in 2017 between the United States and Canada.
Over the past year, increased US oil
production has significantly reduced that deficit as well. When Bill Clinton
signed the NAFTA Bill, presented to him by a Congress which approved it by large
Republican majorities in both Houses of Congress, he said, "NAFTA means
jobs. American jobs, and good-paying American jobs. If I didn't believe that, I
wouldn't support this agreement."
Of course, those high paying jobs are in primarily the services sector,
which Trump ignores and in which we actually do have a positive balance.
So now for the
history lesson (you knew I would, didn’t you?) The impetus for a North American
free trade zone actually began in 1979 with U.S. President Ronald Reagan, who
made that idea a large component of his campaign when he announced his
candidacy for the presidency in November of that year. Canada and the United
States signed the Canada–United States Free Trade Agreement (FTA) in 1988, and
shortly afterward Mexico’s President Carlos Salinas de Gortari approached (then
US president) George H. W. Bush to propose a similar agreement in an effort to
bring in foreign investment following a widespread Latin American debt crisis.
As negotiations commenced, under the aegis of the Bush White House, the
Canadian government under Prime Minister Brian Mulroney feared that the
advantages Canada had gained through the Canada–US FTA would be undermined by a
US–Mexican bilateral agreement and asked to join the talks.
Following
diplomatic negotiations dating back to 1990, the leaders of the three nations
signed the agreement in their respective capitals on December 17, 1992. (G.H.W.
Bush still POTUS) The signed agreement then needed to be ratified by all three
nation's legislative or parliamentary branches.
The earlier
Canada–United States Free Trade Agreement had been controversial and a divisive
issue in the 1988 Canadian election. In that election, more Canadians voted for
anti-free trade parties (the Liberals and the New Democrats), but the split of
the votes between the two parties meant that the pro-free trade Progressive
Conservatives (PCs) came out of the election with the most seats and so
took power. Mulroney and the PCs had a parliamentary majority and easily passed
the 1987 Canada–US FTA and NAFTA bills. However, when Mulroney was replaced as
Conservative leader and prime minister by Kim Campbell. Campbell led the PC
party into the 1993 election where they were decimated by the Liberal Party
under Jean Chrétien, who campaigned on a promise to renegotiate or abrogate
NAFTA. Chrétien subsequently negotiated two supplemental agreements with Bush,
who had subverted the LAC advisory process and worked to "fast track"
the signing prior to the end of his term, ran out of time and had to
pass the required ratification and signing of the implementation law to
incoming president Bill Clinton.
After much
consideration and emotional discussion, the U.S. House of Representatives
passed the North American Free Trade Agreement Implementation Act on November
17, 1993, 234–200. The agreement's supporters included 132 Republicans and 102 Democrats.
The bill passed the Senate on November 20, 1993, 61–38. Senate supporters were 34
Republicans and 27 Democrats. Clinton signed it into law on December 8,
1993; the agreement went into effect on January 1, 1994.
Why all the
detail? Because Trump has “spun” free trade as a creature of the Democratic Party,
when in fact, it has been a Republican/conservative ideal. In fact, here’s a quote from the late Senator John McCain in
the 2008 campaign, "By the way, Senator Obama said he would unilaterally
renegotiate the North American Free Trade Agreement…”
The gist of Obama’s criticism of NAFTA was almost precisely
what Trump would ballyhoo 10 years later as his own brainchild!
OK, so while
Trump rails against all things Obama, including NAFTA (by extension) and the
Trans-Pacific partnership, (a sort of Asian-America version of NAFTA, which
Trump killed by executive order, just because he could, since it was an Obama
initiative) let’s look at some interesting facts, not "fakes" (remember facts?) regarding
NAFTA, Republican and Democratic party positions.
I have already
shown that NAFTA is thoroughly Republican and Conservative in origin. Do not
conflate that with my saying it was a bad thing, as Trump has repeatedly done.
I’m just pointing out that he’s slandering the wrong folks when he attempts to
lay NAFTA at the feet of the opposition, since it was Reagan and Bush’s darling
from the get go.
Now here’s the
real reason this matters. What Trump is calling a “new” trade agreement is
Almost identical to one he denounced and trashed immediately upon taking office
– The Trans Pacific Partnership (TPP). Lost in all the Trump bullshit polluting
the political landscape are several significant facts.
While TPP was in most areas Asian oriented, both Mexico and Canada had asked to be parties
to the negotiations because of concerns that said pact might weaken NAFTA
provisions. In fact, what the Obama team negotiated was a series of concession
from both that are almost identical to what Trump is claiming as “his”
victory in the NAFTA rewrite. In other words, there was no need to renegotiate
NAFTA because the Obama administration had already done it. Those same
negotiators who Trump styled as “The worst negotiators in the world,” had
already accomplished almost everything that Trump is now claiming credit for. Even
odder, many of them are even the same guys!
Key Trump “concessions”
include:
Increasing the percentage of US made parts required for a
car to be Duty free (already negotiated under TPP)
Access to Canada for dairy exports from the US (Already
negotiated at a more advantageous amount [to the US] under TPP)
What was done under TPP and is missing from the Trump NAFTA
rewrite (because he really doesn’t care about working stiffs) is a litany of more
stringent requirements for use of Mexican workers assembling American made
parts in Mexico, which in essence would have reduced the Mexican “cheap labor” edge, encouraging
more assembly to be done in the US.
What WAS done by Trump, and which will
directly hurt many Americans, mostly low income folks, is protectionism
favoring what is already by far the most profitable industrial sector in America,
Big Pharma. Apparently, net profits as high as 30% annually aren’t enough, so
as part of Trump’s redesigned “NAFTA lite” It will become far more difficult,
and in many cases impossible, for US patients to procure (less expensive, yet identical)
generic drugs from Canada rather than pay “on patent” for US brand names. Truth
told, (in the interest of full disclosure) generics are generally more expensive
in Canada that the same generic in the US, but for those drugs still enjoying
the, in my personal view, excessive patent protection period in the US, the
story is different.
Miracle drugs, such as Hep C wonder cure Harvoni, although
developed with your tax dollars (NIH grant to Emory University) are still
priced far beyond the reach of any but the most well insured at about $84,000 per
cure in the US. It is cheaper in Canada (although still expensive), but will be
unobtainable for Americans under the new agreement.
But
wait, it gets worse. Ledifos, a generic form of Harvoni, produced in India
under license from Gilead Pharmaceuticals, the Harvoni patent holder, sells for
about $1200. That’s not a misprint; this identical cure costs patients (where
it is available) .015% of what US patients pay, yet is the exact same
medication. This would be a Godsend to
low income US and Canadian Hep C sufferers, but under Trump’s sweetheart deal
with Big Pharma, will it be at least 17 more years until US sufferers can get
Ledifos from Canada! Meanwhile Medicare drug costs continue to skyrocket even
though around 60% of new on patent medications were developed with government
funded R & D.
Summarizing:
The essentials of what Mr. Trump is claiming as an innovative and much improved
Canada/US/Mexico trade agreement were already in place when he took office. And
he killed it! What has replaced it is about the same as the Obama administration's
improvements incorporated into TPP. However, several facets are actually disadvantageous
to some Americans, and predominantly lower income folks.
Even Forbes, a generally conservative source agrees.
And, finally, if by
supporting the f***wit currently in the White House, you believe you’re just
continuing the robust Reagan Republicanism you’ve been conned into believing,
take a moment, travel back in time and read this 1993 anthem of praise to Reagan
and NAFTA.
I hope you’re not too conflicted now!
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