NAFTA’s role in the US and East County

The North American Free Trade Agreement has been the subject of immense international debate. The forefront of this debate is, of course, centered on the deal’s most powerful signatory: the United States. 

The North American Free Trade Agreement has been the subject of immense international debate. The forefront of this debate is, of course, centered on the deal’s most powerful signatory: the United States. 

The U.S., headed by President Donald Trump, has taken aim at the treaty, calling it unfair and anti-American, while our northern and southern neighbors of Canada and Mexico contend that it is a fair international agreement whose precepts help trade between the triumvirate flourish.

To understand the complexity of NAFTA, one must understand the geopolitical nature of any treaty centrally organized around trade. 

You see, there is an open debate among economic theorists as to whether free or fair trade should take precedence in making decisions about, well, trade. 

Proponents of free trade insist that market forces will have an ameliorating effect on all industries and ultimately trickle down to the consumer in the form of reduced costs and increased quality products and services.

Proponents of fair trade insist that trade policies focused on free trade tend to favor nations who employ unethical practices to decrease costs and get ahead. For example, China is known to have unethical employment standards resulting in conditions comparable to prison life and slavery. 

Of course, the disgustingly low wages workers are paid and their horrific work conditions lead to lower costs, but could the United States ever compete with this? More importantly, should we? The fair trade advocates would say no.

Pivoting back to the topic of NAFTA, the issue is less about ethical standards and more about what many see as unfair trade surpluses. 

To U.S. protectionists (another term for fair trade advocates), the issue is that Canada and Mexico are allowed to flood U.S. markets with products and services while the U.S. is somewhat pinned when it comes to reciprocation. 

This is evidenced by the trade deficits we have with Canada and Mexico and the jobs we lose to them. 

Between 1994 and 2010, the U.S. trade deficit with Mexico (that is how much more they import to us vs. how much we export to them) sat at $97.2 billion.  

Making the case that the U.S. has benefited as much as, let alone more than Canada and Mexico, is highly untenable. 

But does that mean that the treaty should be scrapped? 

For those of us straddled in East County, this question may seem trivial, since it can seem like the effect of NAFTA being retained, repealed, or replaced would have seemingly no impact on us.

That is not true. 

As much as we all want America to prosper in trade deals, when it comes to the bottom line for businesses, price trumps patriotism, and insofar as NAFTA is concerned, it has certainly helped bring down prices for businesses. Production costs in Mexico are harrowingly cheaper than they are here. 

A blanket scrapping of NAFTA would almost certainly see prices rise in the short term for businesses around America – including East County and San Diego proper.

But what about the long term? 

Overall, I think the president makes some very cogent points when he observes the unfairness of these trade deals. 

Just because Mexico can manufacture at a much higher speed and with much lower costs does not mean that the U.S. must support it, especially given the aforementioned point about how these third world countries use unethical economic and employment practices to get an edge. 

Thus, in the long term, I actually think a fairer trade deal would have a more fruitful impact on the United States’ economy even though short term consequences might be a bit harsh. 

Remember, it took a painful, dreadful World War to help ignite the US economy in the 1950s. By comparison, NAFTA is a much easier pill to swallow.