THE FUTURE of the U.S. economy is at stake this week in a closed-door conference among three key trading partners. Starting Wednesday, representatives of the United States, Canada and Mexico will begin a fourth and possibly pivotal round of negotiations on overhauling the North American Free Trade Agreement, a 24-year-old pact that has deeply interconnected the three major economies.
It is often said that presidents get blame or credit for the state of the economy while they are in office, even though they have done relatively little to affect it. But if President Trump makes an unwise move on NAFTA, he could seriously hurt workers on all sides, and he would be directly responsible. And so far, he seems to be sticking to dangerous positions on the trade agreement.
When the renegotiation process began over the summer, there were hopes that U.S. officials might accept a moderate overhaul. The trade agreement was written when the information technology economy was nascent; new trade rules could modernize how the North American trade region treats digital products. New technology could streamline the customs process. Coordinating rules on small businesses also could help them compete more effectively in international markets. These and other changes were reasonable and within reach.
But the Trump administration’s ambitions seem much bigger — regrettably so. Though the U.S. position is not quite clear, indications for this week’s conference are alarming, with trading partners wary of several potential U.S. demands. For example, insisting that each car exported from Mexico contain a prescribed amount of U.S. parts or labor would upset a finely tuned cross-border trade. Auto and parts manufacturers warn that car prices would rise and thousands of U.S. jobs would be threatened.
Abolishing the processes NAFTA created to solve disagreements about trading practices and cross-border investments would raise opposition from both Canada and Mexico, each of which insists — reasonably — on having a neutral forum to which to bring complaints.
Adding a five-year sunset clause to NAFTA, which would require all the parties to re-up the pact every half-decade, would defeat the purpose of the trade deal, which is to build certainty and predictability in cross-border trade.
Each of these and more would violate the bedrock principle that the government should, as far as possible, allow investment to go where is it most needed so that goods can be sold to the widest number of people at the lowest price. If Mr. Trump’s trade officials insist on one or all of these unreasonable demands, they could bring the trade talks to a standstill. The president, long a demagogic NAFTA critic, might then scrap the deal entirely. Whatever criticisms he had about NAFTA a quarter-century ago, the deal has already reshaped the economy, mostly for the better. Undoing the economic integration now would risk massive economic damage.
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