By: Jemma Tan
One of President Donald Trump’s bold campaign promises in order to bring back jobs was to re-negotiate the North American Free Trade Agreement (NAFTA), and it’s already losing steam. The President’s inability to guarantee the trade deal’s abolition puts him at a precarious position between the rural and industrial constituent interests.
The “Worst Trade Deal” Evaluated
Ratified in 1994, the trade agreement stimulated trilateral trade between the United States, Canada, and Mexico through the reduction, and eventual elimination, of export tariffs. Between its ratification and last year, intercontinental trade more than tripled, rising from 290 billion USD to $1.1 trillion per annum.
With no trade barriers, American companies found a suitable export market in the less developed Mexico. Between 1993 and 2003, U.S exports to Mexico rose by 134%, accounting for approximately 97 billion USD worth in goods. On a regional level, border states like Texas and California saw the highest growth in exports. Significant growth was also observed in several northern industrial states such as Michigan, Ohio, Illinois, Indiana, and Pennsylvania.
Despite netting an increase in American GDP, a major criticism of NAFTA is the outsourcing of domestic jobs to Mexico. The loss of manufacturing jobs has fermented anti-globalization sentiments in the same Rust Belt states that benefit from export-led growth.
The Corn in the Side of Trump’s Trade Policy
Still, the brunt of NAFTA falls not on American shoulders but on those of Mexican farmers. Small, local farms are unable to compete with the juggernaut of American agricultural exports who have unrestricted trade pathways into Mexico. The influx of American exports drove up rates of food prices, with a reported 20 million Mexicans living in food poverty.
Those wishing to escape poverty take advantage of open borders and head to America. This, however, has proven to be an equally thorny problem. Trump’s 2016 campaign took a notorious anti-immigration stance that resonated with many who felt overlooked by NAFTA.
Building an effective trade policy is not as easy as Trump initially assumed. Repealing NAFTA would re-install export tariffs. The Mexican government has threatened to respond to Trump’s proposed changes with a corn tax. Corn exports to Mexico totaled around 2.4 billion USD per annum in 2015, making it one of the most viable markets for American farmers.
Scrapping NAFTA would be a blow to the American agricultural sector in an already precarious economic situation. To their credit, the administration realizes this and has scaled down the intensity of their attack on NAFTA from outright repeal to amendment.
On one hand, President Trump is seeking to consolidate the bloc of white, working-class voters from Rust Belt states who rallied behind his anti-trade banner. The flipping of these conventionally Democratic states in the last election was critical to his victory. On the other, if Trump follows through on his vision for NAFTA, he risks estranging the traditionally Republican farming states of the Mid-West.
It is unlikely that rural states such as Iowa or Texas, two of the largest corn exporters, will abandon support of the Republican Party. A long-ingrained evangelical tradition has firmly embedded rural communities into the cultural ideology of conservative politics. Still, Trump knows he must account for the agricultural lobby lest they grow dissatisfied.
Taking away NAFTA is not the panacea to America’s economic problems. What the administration should focus on is educating its citizens on the trade-offs that are inherent with every policy. The agriculture sector must recognize that export-led development goes together with immigration. This requires Trump to scale down on the nationalism-infused rhetoric. He must remind the agricultural sector that their economic profit comes with increased immigration and that America’s prosperity depends on more, not less, diversity.
With 23 years of history, NAFTA is too intractable for Trump to eliminate. He must realize that he may not be able to bring a million jobs back to the country. Instead, his policies should strive to implement programs to help industrial states adapt to globalization by providing new avenues of employment in emerging industries. This will, of course, be met with arguments for preserving way of life, but it may be the most effective way of convincing the American people that globalization can work in their favor.
The fervor of anti-globalization may be strong. Despite all of Trump’s nationalistic appeals, America is undeniably dependent on the world. It cannot exist in isolation. The President may not have known that during the campaign, but he surely knows it now.
Jemma Tan is an undergraduate student at the University of California, Los Angeles, studying Political Science.