Trump's bark hasn't been backed up by bite on NAFTA
North American free trade consensus will hold despite President Trump and his rhetoric, says Steven Zhou
U.S. President Donald Trump has made a lot of noise over trade deals in his first few weeks in office — pulling the country out of the Trans-Pacific Partnership agreement and continuing to promise, at the very least, "tweaks" to the North American Free Trade Agreement.
But his bellicose derision of trade pacts like NAFTA should not translate into any illusion that his executive policies will automatically re-enfranchise the embattled American worker.
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This is particularly true for Canada. Tom Donohue, the head of the influential U.S. Chamber of Commerce, recently said to an audience in Ottawa that the free trade consensus linking Canada and the U.S. is in no danger. Whereas the U.S.'s goods trade deficit with Canada was only about $15 billion in 2015, it had a nearly $60 billion deficit with Mexico in the same year.
It's the latter country that seems to be in the Trump administration's crosshairs, though it's still unclear exactly how the Trump administration aims to go about any subsequent renegotiations.
Both Canada and Mexico have quickly agreed to sit down with the U.S. to restructure NAFTA, but Trump's trade team hasn't been put together yet.
Trump's nominee for trade representative, Robert Lighthizer, hasn't been confirmed yet. The whole process could take months because departments and agencies like Commerce and Labor all have to get on the same page about any changes that might be negotiated, particularly when it comes to any labour-related laws.
In other words, so far, Trump's consistent bark about withdrawing from NAFTA (should he not get his way) hasn't been backed up by much bite.
Even if, by some miracle, NAFTA ceases to exist, the Reagan-era Free Trade Agreement between the U.S. and Canada — which preceded NAFTA — will just kick in, and it's not hugely different.
As far as Canada is concerned, Trump is likely to ask for lower regulation standards for U.S. businesses, hardly a reason for optimism as far as the American worker is concerned.
But at this point — despite the rhetoric — it's still totally unclear what the specific issues will be when it comes to renegotiations. This suggests that Trump really hasn't thought the whole thing through yet.
Instead, the U.S. president has been talking about how he's going to focus on security and immigration issues when it comes to NAFTA, a deal that doesn't even cover those areas. This is further evidence that the president doesn't fully grasp the specific policy implications of his tough talk on NAFTA.
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He has used the issue to propel himself to electoral victory, but is having a hard time following up on exactly what he meant, policy wise. This is the biggest sign that, as far as North America is concerned, his administration is in no place to systematically rejig the free trade consensus.
To actually raise labour standards for U.S. workers, Trump would have to, by law, cede much of the decision-making process to Congress. The idea of a GOP-controlled House and Senate agreeing to higher labour — or even environmental — standards is laughable, simply given the well-known pro-business nature and character of the American right.
Moreover, Trump's press secretary, Sean Spicer, also said in a recent press conference that the U.S. might ask for a 20 per cent tax on Mexican imports to fund the border wall that Trump has long called for. There is precisely zero indication that the Mexicans will agree to this rather esoteric idea.
So the notion that a Trump presidency will shatter the international free trade consensus and the business establishment itself, while sticking up for the American worker, is highly questionable. No one on Trump's economic team has a history of sticking up for environmental or labor rights.
Yes, Trump has stepped away from the TPP and talked up a storm about how free trade is breaking the back of American workers, but he doesn't seem to have many details when it comes to exactly how he's going to change the status quo.
Trump portrays himself as someone who's genuinely outside the neoliberal economic elite of America. That depiction, along with many other factors, may have gotten him votes — but it's hard to see how he's going to live up to the billing.