The Trump administration continues to stand outside the playing field as others move forward with significant trade deals. The most recent evidence is the agreement of eleven nations to move forward with the Trans Pacific Partnership (TPP) without U.S. participation. The new TPP Agreement includes not only Southeast Asian countries, but our neighbors, Canada and Mexico who are currently participants in NAFTA with us.
We continue to stumble along in the NAFTA negotiations, evidencing an inability to reach compromise and develop a trade policy which takes into account the realities that exist in 2017. It has been well publicized that Mr. Trump’s assertions that we have a trade imbalance with Canada is fake news, as in fact, currently there is a $12 billion surplus in favor of the United States. This most recent round (5th) of negotiations have seen significant resistance if not outright rejection from Canada and Mexico regarding auto contract requirements; the lapse of NAFTA after 5 years; dispute resolution provisions; and Agricultural requirements. The Canadian dollar is weakening as investors weigh the NAFTA negotiations or lack thereof. We also must be cognizant that time may be running out as after March 1, 2018 it will not be possible to continue negotiations due to the Mexican presidential election.
There was much fanfare about a quick deal with the British once Brexit has been resolved. The Brexit negotiations have bogged down, and there has been no movement with regard to a US/ British bilateral trade agreement. Our greatest fear should be that China will fill the void we have left as the Trump administration fails to understand that as regional trade pacts, and global trade pacts are executed and implemented, there is a strong likelihood that there will be a significant negative impact on our GDP, as well as on manufacturing that Mr. Trump so desperately wants to return to the US. I think it is fair to say that most economists believe that the significant return of manufacturing of the type that existed from 1950 through to the 1990s is a fantasy unlikely to be fulfilled. This most recent trip to Southeast Asia reflects the Trump administration’s lack of understanding of the combination of forces that are at play in international diplomacy and economics. It is unclear whether the administration understands the interconnectedness, not only of the world, but of defense, business and values in terms of how other countries will respond to us, and if they will see the need to continue to negotiate with us and to engage in trade and our common defense.
Closer to home, we see rancorous and ill-conceived decisions involving Canada, in particular, those related to softwood lumber and the Boeing/Bombardier dispute. These actions focus on areas of the economy which are relatively small, but which set a tone of discord rather than working toward common ground.
The lessons of history also seem to be ignored. The Trump administration should review the Smoot-Hawley Tariff Act of 1930 and the consequences it wrought for the american economy. Economic Isolationism was reversed by a succession of legislation including the Reciprocal Trade Agreement Act of 1934 and the General Agreement on Tariffs and Trade in 1948. Numerous other actions taken since 1948, including entering into numerous trade agreements and the rise of the World Trade Organization in 1955 have contributed greatly to our prosperity and political stability. Can America adopt isolationism in trade or will global forces overrun the view that we can out wit and out muscle the rest of the world?
It is a fair question to ask when will President Trump say he is withdrawing from NAFTA. How will the administration explain the potential loss of hundreds of thousands of jobs, the breakdown of twenty (20) years of supply chain integration, and sustain the support of Canada for our mutual defense, particularly as it relates to NORAD.
Mr. Owens is a former member of Congress representing the New York 21st, a partner in Stafford Owens in Plattsburgh, NY and a Senior Advisor to Dentons to Washington, DC.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.