International Trade and the Trump Administration

May 9, 2017 Updated: May 9, 2017

For decades, international trade and concurrent “trade agreements” have been touted by economists as the epitome of the “good thing” in economic and fiscal terms. “Free trade” has been their battle cry with the intimation that countries and their citizens will prosper more if restrictions on imports and exports are eliminated.

The poster child for this approach has been first the Free Trade Agreement (FTA) between the United States and Canada (brought into force in January 1989) and superseded by the North American Free Trade Agreement (NAFTA), which included Mexico and came into effect in January 1994.

Although beloved by economists, they were less—sometimes much less—beloved by a range of politicians, including labor unions and environmentalists. Many Canadians had long been skeptical of trade agreements with the United States believing they would lead to U.S. annexation (the Liberal Party lost the 1911 election to the Conservatives largely on the issue of free trade).

While opposition became somewhat less intense during the ensuing 75 years, it was now the Liberal Party that opposed free trade as epitomized by the FTA with a memorable advertisement in the 1988 election showing the FTA erasing the border between the U.S. and Canada. (The FTA barely registered politically in the United States where it passed Congress easily).

Although the FTA was regarded as a success, controversy was more intense over NAFTA. The Liberals made it one of their main points of attack against the Conservative government during the 1993 election campaign with Liberal Party leader, Jean Chretien, promising its renegotiation. Consequently, the United States held off Congressional approval, awaiting Canadian action.  

When Chretien’s renegotiation devolved into relatively minor tweaks, the U.S. Congress took up ratification of the agreement. Arguments were much more politicized, epitomized by 1992 independent presidential candidate Ross Perot claiming that NAFTA would generate a “vast sucking sound” as U.S. jobs were pulled south into Mexico, reflecting the large wage differentials.

NAFTA’s celebration of its 20th anniversary in 2014, emphasized the vastly increased trade between the “three amigos,” but rising popular discontent in the United States made trade agreements a “third rail” topic. Critics noted that, to be sure, trade had increased, but there was no proof that it wouldn’t have increased without any agreement.

Republican candidate Donald Trump denounced virtually any and all trade agreements. His rejection of the Trans Pacific Partnership (still in final negotiation at the time) prompted Democratic candidate Hillary Clinton to reverse her earlier support for it. More importantly, Trump bombastically denounced NAFTA as a “disaster” and the “worst trade deal in history.” As president, however, he has not moved immediately to abrogate NAFTA, but called for renegotiation to make it more “fair” for the United States.

The existential point with trade agreements is that there are winners and losers. Economists gloss over job losses and reduction of traditional manufacturing industry. There has been a blithe expectation that those losing jobs can find other good jobs in rising high-technology or service industries, combined with retraining for workers that have lost jobs.

Equally blithe explanations that job loss has been driven by technology increasing productivity ring hollow for the 55-year old former manufacturing worker who’s new “McJob” pays $12/hour when his previous salary doubled or tripled his current wage. And to be cruel, many of these unemployed are not intellectually equipped to absorb “training” for high tech jobs.

Traveling through devastated industrial areas provides vivid videos. Perusing a children’s clothing chain store and noting that not a single item had been made in the USA drives it home viscerally. The presence of 11 million illegal aliens willing to work for low wages adds insult to injury.

Thus it is clear the Trump administration will emphasize “free and fair” trade with U.S. trade representatives/negotiators emphasizing job creation from trade agreements. Previously, negotiators had multiple negotiating goals; rebalancing will stress job creation.

Longstanding Canadian protectionism regarding dairy and poultry production will be seriously challenged. A relatively small number of Canadian farmers have both limited such imports from the United States while simultaneously driving up the prices for Canadian customers. Such is unfair to both countries—it should be quickly resolved.

Less amenable to agreement is softwood lumber—disputes over which will probably continue until North America is “clear cut.” The United States claims Canada’s nationally owned forests provide implicit subsidy (the United States has no problem with Canada’s privately owned woodlands).  Predictions are for extended, disputatious discussion, perhaps ultimately requiring a Prime Minister-Presidential deal.

David T. Jones is a retired U.S. State Department senior foreign service career officer who has published several hundred books, articles, columns, and reviews on U.S.–Canadian bilateral issues and general foreign policy. During a career that spanned over 30 years, he concentrated on politico-military issues, serving as adviser for two Army chiefs of staff. Among his books is “Alternative North Americas: What Canada and the United States Can Learn from Each Other.”  

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

David T. Jones
David T. Jones