The Current

NAFTA not to blame for job loss in U.S., says trade expert

Now that Donald Trump has the keys to the Oval Office, he's already unceremoniously pulled the U.S. out of one major trade deal — the Trans Pacific Partnership. Is NAFTA next? And what will ripping it up mean for Canada, the U.S., and Mexico?
U.S. President Donald Trump shows off an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership trade pact agreed to under the Obama administration, Jan. 23, 2017. (Evan Vucci/Associated Press)

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It was more than 24 years ago, when then U.S. president George H. W. Bush, and former Canadian prime minister Brian Mulroney forged the North American Free Trade agreement.

Now, the trade pact that's governed commerce across this continent could be "ripped up" all together under U.S. President Donald Trump who characterized NAFTA as the worst trade deal America ever made.

"From this day forward it's going to be only America first," says Trump.

What it means for Canada

As Canadian Prime Minister Justin Trudeau works out a strategy for dealing with the inevitable reworking of NAFTA, Canadian trade lawyer Mark Warner says Canada should be concerned but not worried.

"Obviously the United States is our major trading partner … the bilateral relationship is strong, so we have to care as to what's being said," Warner tells The Current's guest host Connie Walker.
Prime Minister Justin Trudeau and his cabinet in Calgary are currently working out a strategy for dealing with the new American administration, including renegotiating NAFTA. (Sean Kilpatrick/Canadian Press)

"On the other hand … [Trump] is the author of a book called The Art of the Deal which is a lot about getting people really excited before he sits down to negotiate with them, and I think if we look frantic that's exactly what he'd like to see." 

What does Canada have to lose if NAFTA is reopened? Warner says it would involve companies making new location decisions and the mobility for professionals to work across North American borders would be gone.

President Trump blames NAFTA for the decline in manufacturing jobs in the U.S.. Warner doesn't agree. For Warner, it's due to both automation and China's entry into the World Trade Organization (WTO). 

He also isn't convinced that NAFTA has affected Canada's manufacturing sector. According to Warner, there's no question of the decline over the last 60 years in the manufacturing share of our gross domestic product coupled with the increase in service industries.

"And that was going on before and after NAFTA, and frankly I think would have gone on without NAFTA."

What it means for the U.S.

Edward Alden, a Bernard L. Schwartz senior fellow at the Council on Foreign Relations who specializes in U.S. economic competitiveness, agrees with Warner on China's impact in the U.S. manufacturing sector.
Prime Minister Brian Mulroney signs the North American Free Trade Agreement during a signing ceremony in Ottawa, Dec.17, 1992. (Tom Hanson/Canadian Press)

"We saw the loss of five or six million U.S. manufacturing jobs in the 2000s," says Schwartz, mostly due to automation but a significant cause was competition from China.

Alden tells Walker rewriting NAFTA to fit Trump's desire for more investment and job creation in the U.S. is going to be hard to do.

"NAFTA is about North American production. It's about privileging companies that invest in North America versus other parts of the world. To try to rework NAFTA to say favour the United States over Canada and Mexico, there's certainly no way to do that within the spirit of the agreement."

What it means for Mexico

Professor Judith Teichman tells Walker reopening NAFTA is much more worrisome for Mexico than for Canada.

"The Mexican economy has not been doing well since NAFTA with a average annual growth rate of about one per cent per year. Job creation has not been anything close than what was hoped for," says the professor of political science and international development studies at the University of Toronto. 
Mexico's President Enrique Pena Nieto has called Prime Minister Trudeau ahead of meeting President Trump to stress his intention to preserve NAFTA. (Pablo Martinez Monsivais/Associated Press)

Teichman says the auto industry has pushed this perception that Mexico is on the winning side of NAFTA because of it's growth and employment generation.

"But if you take the auto industry out of the discussion then the trade deficit with Mexico virtually disappears, and growth in other sectors of the economy that has produced employment has been quite dismal," says Teichman.

Teichman says if Trump keeps true to his promises of sending a number of deporting undocumented Mexicans and thereby stopping remittance payments, it will result in a dramatic rise in poverty combined with the economic downturn.

"So it's not, I think, a good scenario for Mexico — it's really quite worrisome."

Listen to the full segment at the top of this web post.

This segment was produced by The Current's Kristin Nelson and Samira Mohyeddin.