Tuesday, August 22, 2017

There's Principle, There's Reality, And Then There's NAFTA

     It takes a talented wordsmith to come up with a catch-phrase as ringing with ambiguity as "principled realism," the doctrine that President Trump just espoused in last Monday's speech on the American approach to Afghanistan.  Kudos to the ghostwriter who dreamed that one up, and a great big hearty "hear, hear!" to the administration's policy makers as they engage Mexico and Canada in the just-started NAFTA renegotiations. The notion that "principle" has to be modified by "realism" is one that South Dakotans should hope is in the marching orders for Trump's negotiating team, because Trump's charge that "NAFTA is the worst trade deal ever signed" completely ignores the value of the deal to South Dakota's ag industry.
A Flat-Out Good Deal For South Dakota

     We should hope that our Trump-supporting congressional reps, Republicans all, will make sure that the administration heeds the "realism" inherent to NAFTA as it applies to the benefits it created for South Dakota.  Round One of the renegotiating sessions concluded last Sunday, with Round Two scheduled for the first week of September.  Several more sessions are planned, targeting the end of the year for a conclusion to the process.  The American approach has so far been consistent with President Trump's abhorrence of the deal, with the U.S. lead negotiator Robert Lighthizer announcing at the end of last Sunday's talks that "for countless Americans this agreement has failed."  
     Unfortunately for us South Dakotans, though, Lighthizer's politically popular sentiment is a potential deal-killer, even as his claim doesn't hold water.  That's the conclusion of a detailed study in, among others, U.S. News and World Report, published last February, which notes that job losses in manufacturing are widespread throughout the developed world, mainly the result of automation, not trade deals.  Politifact.com last year examined all this rhetoric and concluded that "NAFTA produced neither significant job losses nor job gains."  Marketplace.org had similar findings, saying that "NAFTA's effect on the net number of jobs was minimal."  The Trump administration's continued insistence on the opposite is a political "principle" that needs to be displaced by economic "realism."  
     South Dakota's gains via NAFTA and other trade agreements are an essential component of that "realism" and need to be understood by this Trump-supporting state.  Our U.S. Senator John Thune said as much to KSOO radio in Sioux Falls last month, when he argued that NAFTA has been largely positive for South Dakota.  Last June, Thune told a Senate committee hearing that "it's frankly quite difficult to overstate NAFTA's importance to our agricultural sector."  I can only add that it's frankly quite difficult to overstate the importance of Thune's penetration of Trump's poorly developed and politically-motivated "principle" with some solid, South Dakota-specific "realism."  
     That "realism" is only amplified by the words of farmers and their organizations in support of NAFTA.  Said the National Corn Growers last May, "since NAFTA was implemented, U.S. ag exports to Canada and Mexico have tripled and quintupled, respectively . . . we want to ensure any updates to NAFTA maintain or increase opportunities for American farmers and ranchers."  Trump's bogus, politically-motivated and unsupportable contempt for NAFTA may strike some as a savvy negotiating position, but its emptiness of factual content will render it impotent.  We need to lighten up and cooperate, not confront.    


  1. I swan NAFTA renewal has one thing going for it, viz., the treaty was not concluded by President Barack Obama.

    1. Please edit so your comment makes sense.

    2. Numerous actions by the current occupant of the Executive Mansion support the widely held contention, at least in some quarters, that any demarche undertaken by the previous administration is to be cancelled, abandoned or hamstrung. For example, it is alleged by the Punditocracy that the current head of the Federal Reserve, despite longstanding precedent, will not be retained inasmuch as that worthy was appointed by the previous president.

  2. John Tsitrian here. I'm posting this on behalf of my reader Lanny Stricherz, who's having some technical problem posting on the blog: While I can agree with you that NAFTA has been good for SD farmers and AG in general, I have to disagree with you on its effects on labor. You insist that the majority of the problem with manufacturing as it relates to NAFTA has been automation. That is not necessarily the truth. The textile industry is a case in point.
    I remember thinking that a pair of Wranglers having dropped from about 16 bucks to 11 or 12 bucks was not such a bad thing for the consumer, so maybe NAFTA wasn't so bad after all. But of course that drop was short-lived as clothing prices went right back up and now exceed what they were prior to NAFTA.

    The race to the bottom on wages, however, continues at the rapid pace that the trade agreements generated. The textile jobs in the Carolinas weren't lost to automation but to other countries. The race that I mentioned can be realized by reading the following article from COHA, Council on Hemispheric Affairs. http://www.coha.org/haitian-wage-protests-and-the-future-of-the-international-textile-industry/

    The following article also from COHA gives an insight into some of the options on dismantling, changing or keeping NAFTA as is.

    I suggest that far more detrimental to the AG industry than dismantling NAFTA is the rhetoric coming out of this President and others as regard building the wall and then making the Mexicans pay for it.

    Do you eat avocados, John? I do, and they have gone from a buck to 2 bucks and it is largely because of that rhetoric, because Mexico produces a good share of the avocados that we Americans eat.

    1. Thanks for the thoughtful comment, Lanny. Here's an overview of how NAFTA and its renegotiation will affect some major industrial (including ag) sectors. Note that the value of American textile foreign shipments to increased from $67 billion to $74 billion from 2009 to 2016. About 15% of that went to Mexico and Canada. You'll have to c & p the url to your address bar to read the piece, as Blogger won't let me link directly from the comment section: https://www.nytimes.com/2017/04/27/business/economy/nafta-impact-industries-cars-agriculture-apparel-pharmaceuticals.html?mcubz=0

  3. The strange thing, John, is that both articles, yours from the NYTimes and my second from COHA, show concern for the investors, you know the guys with money in the game, but no labor in the game, but show no concern for the workers who manufacture the goods involved in the trade agreements.

    "In a recent study, the research center concluded that withdrawing from Nafta, or restricting automotive trade, would increase costs for manufacturers in the United States, make its auto sector less competitive, and lower the returns for investors.”

    "Many of NAFTA’s non-trade elements have been shoehorned into the agreement, such as Chapter 11 Investor State Dispute Settlement (ISDS).[i]Chapter 11 allows for the protection of investor rights, in which investors can receive monetary reward from a NAFTA government that has violated investors’ rights. Chapter 11 ISDS is contentious because it solves such disputes by a trade tribunal and not through due-process of national courts.”

    While your post shows a 10% increase in the value of textiles in a seven year period, it is talking about yarn or thread manufactured in Georgia where the cotton is grown. I says nothing of the tens of thousands of clothing manufacturing jobs that were lost as I pointed out in the Carolinas, with both NAFTA, CAFTA and other trade agreements.

    And while the auto industry has thrived in all three countries, I remind you that it would no longer exist as it is now, if it had not been bailed out by the American taxpayers.

    Add to that, the cost and the quality of the automobiles of today, I cannot see where NAFTA created any type of advantage for the consumer.

    1. No doubt a number of jobs have disappeared because of NAFTA and other trade agreements, but many new jobs have appeared to take their place. South Dakota, according to my graphic, has more than 15,000 jobs that are directly related to NAFTA. And it's pretty clear that SD agriculture has made some major gains as a result of the treaty.

  4. Good article and analysis John. Could be moot though after trump's remarks in Phoenix last nite.