Trump's simplistic talk on NAFTA ignores the threat of disruption: Don Pittis

The NAFTA deal is easy to understand. Cutting it open and renegotiating the details, not so much.

Love it or hate it, reopening the free trade deal would be wrenching for all 3 countries

Trucks wait to enter the U.S. at the World Trade Bridge in Nuevo Laredo, Mexico. Severing supply chains created by NAFTA would cause serious wounds in the three countries.. (Daniel Becerril/Reuters)

The concept behind the North American Free Trade agreement is wonderfully simple.

In a similar way, U.S. President Donald Trump's campaign promises on NAFTA are clear enough for any fool to understand. 

But when you take those two simple ideas and put them together, you get something that one Canadian trade expert calls "a disaster."

Of course "a disaster" is exactly how Trump described the North American free trade deal during the presidential campaign.
When Prime Minister Brian Mulroney signed the free trade deal with the U.S. in 1987, there were widespread protests, but polling showed the majority of Canadians supported the agreement. (CBC Digital Archives)

"I'm going to tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers," Trump promised fans in Pennsylvania during the campaign. "And I don't mean just a little bit better. I mean a lot better."

And if he can't get a better deal, Trump has threatened to pull out of NAFTA altogether

On the other hand, "Trump is really playing with fire," says Pau Pujolas, an assistant professor in McMaster University's economics department. "It's going to be a disaster no matter what. The question is how much of a disaster it's going to be for us."

These are strong words from opposing points of view about a deal that for more than 20 years politicians of all stripes have been telling us is good for the economy and good for all North Americans.

Access to a bigger market

Canadians weren't all sold on free trade when the U.S. and Canada began negotiating their first two-way agreement in the 1980s.

But by the time smooth-talking Conservative Prime Minister Brian Mulroney had pushed the deal through with a parliamentary majority and promises of access to a market of several hundred million people, Canadians had mostly signed on. Only the people of industrial Ontario opposed the deal.

Canadian nationalists, including another Conservative prime minister, John A. Macdonald, had wanted the sprawling northern country to trade within its borders, using tariffs and the trans-Canada railway.
U.S. President Donald Trump has withdrawn from the Trans-Pacific Partnership, but he has not begun action to renegotiate NAFTA. (Kevin Lamarque/Reuters)

But Canada's trade with its southern neighbour has always been encouraged by geography — although an arbitrary line sketched across North America following the U.S. revolutionary war with Britain imposed a border and interrupted natural north-south trade routes.

The worst fears for the Canada-U.S. deal didn't come true, so even after the Tories were pitched out by the Liberals under Jean Chretien, Mulroney's plan to expand the deal to include Mexico, called NAFTA, was signed into law in 1994.

Protection from protectionism

According to Daniel Béland, Canada chair in public policy at the University of Saskatchewan, NAFTA has been good for Canada.

"Certainly it protected us from the threat of American protectionism, which is now back with Trump," says Béland. "In terms of employment, whether it was of benefit to Canadian workers, that is another story and there's no consensus about that."

Measuring the effects of real-world events is almost impossible, simply because we can't go back over the past 23 years and see what would have happened without the deal in place.
According to some studies, workers like these on a South Carolina assembly line are more likely to lose their jobs to new technology than to free trade. (Chris Keane/Reuters)

Studies that purport to show that NAFTA was good or bad tend to confirm the biases of the groups releasing them.

Béland says there is nothing wrong with updating an international agreement from time to time, but the current context could be the worst possible moment. And he says that it will be neither quick nor easy, nor will it necessarily be good for workers in the United States.

NAFTA's messy innards

As with any free trade deal, while the intent of NAFTA is simple — allowing people and businesses to trade across borders as if they were trading within their own country — reopening the deal exposes its messy innards.

"It's a very complex agreement and there are many different components," says Béland. And each clause will generate a new dispute.

Not only will you have three countries at the table, but interest groups that grudgingly accept the current deal as a fait accompli will begin to raise their voices.

Trade unions, advocates for various industries and environmentalists, plus those who object to provisions allowing investors to challenge a country's laws, are already demanding changes.

For opponents this will be a perfect opportunity. Opening the deal will inevitably lead to new clashes as significant as those when it was first put in place. 

Making significant alterations in the deal would be disruptive not just to Canada, but to U.S. companies as well.

Severing a graft

In the nearly 30 years since that first trade agreement, Canada and the United States have become grafted together so their supply chains flow back and forth across the border like blood vessels and nerves in a grafted limb. Severing that graft would be a serious wound. 

There would be similar effects across the U.S.-Mexico border.

Many of Trump's critics have said the loss of jobs in the U.S. has not been due to free trade. Instead, perhaps the real causes were things like inequality, failure of U.S. firms to reinvest their profits and the rise of job-killing technology.

If so, disrupting the three North American economies with a long and unnecessary clash over trade will only make things worse for everyone.

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Don Pittis

Business columnist

Based in Toronto, Don Pittis is a business columnist and senior producer for CBC News. Previously, he was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London.