Tuesday, October 10, 2017

NAFTA Could Use An Update, Not A Trump-Initiated Wrecking Ball

     President Trump's long-standing beef with the North American Free Trade Agreement (NAFTA) will get aired out this week as the 4th round of scheduled renegotiationsof the
Revise And Modernize
Don't Wreck
landmark trade deal begin today, October 11, in Washington.  We South Dakotans, who've been watching our agriculture-driven economy flounder for the last few years (for data wonks, SD's  2017 statewide taxable sales were down almost 2% from a year ago and our 5-year per capita GDP growth was less than 1% compared to a national increase of more than 6%), should be keeping a wary eye on the talks.  Our ag sector doesn't need to take another hit.

     That NAFTA has been a very good deal for South Dakota is self-evident.  On a national scale, the numbers are eye-popping.  In 1993, when NAFTA came into being, the U.S. exported about $9 billion worth of corn and soybeans to Canada and Mexico.  Thanks to NAFTA, that number jumped to nearly $40 billion.  About 30% of U.S. ag sales go to our North American partners, with the top three products being corn, soybeans and pork.  Even one of Trump's most consistent friends in Congress, our Senator John Thune, has weighed in on the importance of NAFTA to the nation's farm sector, telling KSOO radio last Summer that "open markets, lower tariffs and uniform regulation means more money in the pockets of South Dakota farmers, particularly from livestock."  Thune singled out NAFTA as being particularly "positive for South Dakota."  
   And then there's the rest of the country.  Considering that Trump's well-known hatred of NAFTA is hanging over these negotiations, South Dakotans do indeed have every reason for concern about the future of the deal.  But  what's interesting is that "the worst trade deal ever signed," as Trump often puts it, has important supporters in parts of the country where the President thinks his protectionist agenda would be most helpful.  A piece last Summer in the Detroit Free Press notes that Michigan would be at risk in a drastically revised or entirely ditched NAFTA.  DFP says that "Michigan has more to lose than any other state" if NAFTA's terms are changed according to Trump's wishes.  Credit scoring giant Fitch Ratings says Michigan would be the most affected state in the country because "its economy is the most interconnected" with our NAFTA partners.  
     As it turns out, the uniformity of regulations and the openness of our markets have created those "interconnected" supply and distribution chains that have helped advance both the ag and industrial sectors of all three trading partners.  A 2016 study from President Trump's alma mater The Wharton School of Business notes that NAFTA-driven advances in the U.S. economy have been steady, if modest, and that job re-distribution, not net job loss,  has been the result of the agreement over the past quarter-century.  A study in the Washington Post last August reinforced that conclusion.  
     Trump's politically shrewd tirades against NAFTA played well in the industrial belt around the Great Lakes, where job losses and shuttered factories affected enough voters to give him the wafer-thin electoral victories that took him to the White House.  But the rest of the country, South Dakota (and now Michigan) in particular, stands to lose much as the President continues to focus on that relatively narrow base of support.

1 comment:

  1. It's alleged that President Trump is of the mercantilist persuasion. That position would seemingly be in accord with the assertion by Forbe's Magazine that he disdains the win-win scenario.