The Challenges of Renegotiating NAFTA

Unwinding the North American Free Trade Agreement will be difficult.

By Rhonda FanningJanuary 22, 2017 11:24 pm|

President Donald Trump is making good on his campaign promises to renegotiate or withdraw completely from certain trade deals between the U.S. and other countries.

Monday he signed an executive order which withdrew the United States from the Trans-Pacific Partnership (TPP), a trade agreement among 12 countries.

Trump criticized the TPP during his campaign, calling it a “disaster” and a “horrible deal.” The Obama administration strongly backed the deal, but it was never ratified by the U.S.

Trump said Sunday that he will begin renegotiating the North American Free Trade Agreement (NAFTA) – an agreement that sets rules for international trade between Canada, the U.S. and Mexico – when he meets with the other countries’ leaders.

But Raymond Robertson, professor at Texas A&M, says unwinding NAFTA will be difficult.

“It’s not just as simple as saying ‘Free trade, no tariffs,’” he says. “There [are] provisions in there about dispute resolution and investment provisions. There’s really a lot that could be on the table.”

Robertson says Trump’s description of NAFTA isn’t quite correct.

“If you judge the agreement by what it set out to do, which is to increase trade and increase investment, then it’s hard to say that it was an unsuccessful agreement,” he says. “Both trade and investment increased significantly after the agreement.”

NAFTA has also been criticized for eliminating jobs in the U.S. and increasing income equality.

“There’s certainly a lot to be said for that argument in particular areas in the country,” Robertson says. “But what they don’t mention is the number of jobs created through NAFTA. The increase in trade with Mexico also led to an increase in demand for workers in the United States as well, and that side of the story doesn’t always get told.”

For example, Robertson says many manufactured parts of products are sent from the U.S. to Mexico for assembly. Outsourcing the assembly parts to lower-skill, lower-wage workers in other countries actually increases the demand in the U.S. for workers who are making more sophisticated machinery. Robertson says this creates an opportunity for sales and potentially lowers prices for consumers.

 

Robertson says it’s unclear how exactly Trump will negotiate the deal without it negatively impacting the U.S.

“It’s really difficult for me to see – someone who’s been studying NAFTA since before it was NAFTA – exactly how they’re going to renegotiate this in a way that’s mutually beneficial for the countries without increasing barriers,” he says. “Unwinding it and the details, I think, will be incredibly complicated and very interesting to watch as we move forward.”

Written by Beth Cortez-Neavel.