NAFTA Discourse Divides Us Again

Jim Prevor - The Fruits of Thought

Jim Prevor - The Fruits of ThoughtSince President Trump expressed his intent to renegotiate the North American Free Trade Agreement‭ (‬NAFTA‭), ‬the produce industry discussion reminds one of Yogi Berra’s famous quote‭, ‬“It’s Déjà vu all over again‭,‬”‭ ‬as the arguments have changed little since the original debate over NAFTA‭, ‬which came into force in 1994‭.‬

Producers directly affected by Mexican imports‭, ‬such as Florida tomato growers‭, ‬point out the difficulties imports cause for the‭ ‬domestic industry and allege various subsidies for Mexican growers creating unfair competition‭.‬

Producers in the United States that have export markets in Mexico‭, ‬such as the apple growers of Washington‭, ‬point out the importance of keeping export markets open‭.‬

And those who do direct trade with Mexico‭ ‬‮—‬‭ ‬the importers in Nogales‭, ‬McAllen and other places along the border‭ ‬‮—‬‭ ‬point out the‭ ‬benefits consumers derive from being able to buy the products they wish at the prices vendors‭, ‬including those from‭ ‬countries‭ ‬outside of the United States‭, ‬are willing to sell them‭.‬

Free trade agreements‭, ‬which sound like they should be simple documents‭ ‬‮–‬‭ ‬“No tariffs between our two countries”‭ ‬‮—‬‭ ‬actually turn out to be highly complex‭. ‬Partly it is because of content‭. ‬If the United States and Mexico have a free trade agreement‭, ‬but the United States and Japan do not‭, ‬well what happens if a car is assembled in Mexico‭, ‬but most of the parts come from Japan‭?‬

It is also unclear what the term‭ ‬“trade”‭ ‬actually encompasses‭. ‬Is a truck driving cross the border included‭? ‬Intellectual property protections‭? ‬What about non-tariff barriers to trade‭? ‬Requiring packaging in a particular language‭? ‬For hundreds of years‭, ‬Germany had its own beer purity laws‭, ‬which proscribed anything but water‭, ‬barley and hops in beer‭. ‬In 1987‭, ‬however‭, ‬a group of French brewers brought a case to the European court of justice‭, ‬which found the German law protectionist and thus a violation of its own free trade agreement‭ ‬‮–‬‭ ‬The Treaty of Rome‭, ‬established in 1958‭.‬

We also have a situation where many want free trade only with restrictions‭, ‬so negotiations may include labor and environmental‭ ‬restrictions and‭, ‬in all cases‭, ‬there is a need for dispute resolution mechanisms‭. ‬Agriculture is so sensitive an area that‭, ‬in‭ ‬fact‭, ‬NAFTA has separate clauses related to U.S‭./‬Canadian trade and U.S‭./‬Mexican trade‭. ‬

It is hard to see how the industry as a whole can do anything but consider itself open to modernization
of the accords.

Despite the politics‭, ‬the economics are not really much in dispute‭. ‬Virtually all economists believe free trade leads to greater‭ ‬prosperity‭. ‬The problem is those disadvantaged by free trade are obvious and specific‭, ‬whereas the benefits tend to be more diffuse‭, ‬and thus people‭ ‬who specifically benefit are harder to identify‭. ‬In other words‭, ‬if Florida tomato growers have to close‭ ‬down because they can’t compete effectively‭, ‬they all have names‭, ‬their workers have names and their communities are easily identified‭.

If the benefit to allowing free trade imports in America is that consumers get a less expensive or better quality product‭, ‬the benefit is tiny to each consumer‭. ‬Collectively‭, ‬however‭, ‬lower prices may mean consumers can take more vacations or buy more cars‭, ‬but it is hard to specifically say that an individual person got a job at Disney World because consumers in the Northeast got‭ ‬cheaper tomatoes and subsequently went on more vacations‭.‬

President Trump built his campaign around the idea that imports were hurting American workers‭, ‬but the poster boy for this claim‭ ‬was a Midwestern factory worker who‭, ‬it was claimed‭, ‬lost a good paying union job to foreign competition‭ ‬‮–‬‭ ‬not a low paying agricultural job‭.‬

It is not at all clear that NAFTA had much to do with the loss of jobs in the industrial Midwest‭. ‬There is some argument that by‭ ‬incorporating a lower labor work force into the American production process‭, ‬America has been able to export more manufactured‭ ‬products than it would have had this option been proscribed‭.‬

But‭, ‬in any case‭, ‬it is hard to imagine President Trump wants U.S‭. ‬workers to take harvesting jobs‭, ‬and it is even harder to believe the president wants to allow immigrants to do the harvesting‭. ‬So‭, ‬while growers who feel damaged by NAFTA are‭, ‬quite reasonably‭, ‬seeing this as their moment to try to revise the accords‭, ‬it seems likely these agricultural interests will be thrown under the bus in any negotiations as the administration looks for a face-saving agreement that will allow it to claim it is helping‭ ‬to revive manufacturing in Pennsylvania‭, ‬Michigan and Wisconsin‭.‬

When NAFTA was originally negotiated‭, ‬it so divided the industry that the United Fresh Produce Association didn’t dare take a position on the issue‭. ‬Now‭, ‬institutionalized‭, ‬it is hard to see how the industry as a whole can do anything but consider itself open to modernization of the accords‭. ‬In the end‭, ‬this is a dispute not about policy‭, ‬but about politics‭, ‬and if‭ ‬those looking to limit consumer choice win‭, ‬it will not be by the persuasiveness of their arguments‭, ‬but by the political force‭ ‬they are able to marshal‭.‬