Free-trade agreements became a convenient campaign scapegoat for what ails the U.S., but the blame was wrongly placed. Economists have concluded that automation and other technological transformations account for far more job losses than the free flow of goods and services.
Accordingly, it’s welcome news that after cynically labeling the North American Free Trade Agreement (NAFTA) “the worst trade deal ever,” President Trump appears to have backed off his threat to scrap the pact. Instead, according to a draft letter circulating in Congress, the administration suggests renegotiating the U.S.-Mexico-Canada agreement.
That’s a relief for industries that have built up highly integrated supply chains, as well as those that would face severe dislocations should NAFTA end. But these businesses — as well as the millions of consumers who benefit from their efficiencies — should be aware that even a scaled-down renegotiation would be difficult and disruptive.
That NAFTA and other existing or proposed free-trade agreements are politically orphaned from both parties suggests the need for rational advocates of the benefits and necessity of trade to find their voices.
That’s the view of Cargill CEO David MacLennan, who in a notable speech this week to the Financial Times Global Commodities Summit said: “We also need to help our policymakers demonstrate that trade creates jobs and boosts economic growth. We have to help these leaders speak to their base and build a better life for their constituents. In the United States, that means making sure our leaders know that trade is a net job creator. Today, more than half of the U.S. manufacturing workforce depends on exports.” He added that “nearly half of all exports of U.S.-manufactured goods are sold to the 20 countries that have eliminated barriers through free-trade agreements.”
A similar message and a spirited NAFTA defense could be heard from three of its architects at the University of Minnesota’s Carlson School of Management this week. Joining her former Mexican and Canadian counterparts, Carla Hills, a U.S. trade representative during the George H.W. Bush administration, said that “we need to get facts out on the table.” She appealed to universities, think tanks, chambers of commerce and groups such as the Economic Club of Minnesota to defend trade. She also urged employers to “educate their workers about how important trade is beyond their borders. Since we have about 5 percent of the world’s population creating about 20 percent of the output, we can’t eat it all. We need outsiders to buy it, and that means we need to open our markets, remove trade barriers and create even trading rules.”
Britain, which started Brexit negotiations this week, now knows how reckless rhetoric can create self-inflicted economic and political wounds. Its divorce from the European Union and need to renegotiate trade terms with dozens of countries will be arduous and unproductive.
The U.S. must avoid similar mistakes, and the Trump administration should continue to recalibrate as it reconsiders other trade pacts.