NAFTA Negotiations: Trump Must Preserve This Good Deal

President Donald Trump has ordered his trade representative to renegotiate certain aspects of the North American Free Trade Agreement, which is a good idea. He also has threatened to pull out of the trade accord altogether, which is a terrible idea, a threat made in the service of unreasonable and unrealistic demands that have more to do with posturing than with seeing to the health of the U.S. economy.

There are a few aspects of NAFTA that are in need of revisiting: Internet commerce was nonexistent when the agreement was negotiated. NAFTA was signed in 1993, and Netscape released the first commercial web browser in 1994. In 2017, the most valuable U.S. companies are firms such as Apple, Alphabet, Microsoft, Amazon, and Facebook. There are intellectual-property issues that need to be sorted out, along with a few other issues related to digital commerce, telecom, and banking.

But the domestic dispute over NAFTA isn’t about America’s leading companies. It’s about the firms that used to be America’s leading companies. American manufacturing is doing just fine, despite constant reports of its death. U.S. manufacturing output has, in fact, nearly doubled since the 1990s, when NAFTA was being negotiated. NAFTA is part of the reason for that: Our biggest export markets are Canada and Mexico. What has declined is manufacturing’s share of the work force, and NAFTA is part of the reason for that, too, in ways that are obvious and ways that aren’t.

It is the case that a number of relatively low-wage and low-value manufacturing jobs have moved to Mexico since NAFTA was adopted, though it is likely that without NAFTA those jobs would have simply moved to places such as China and Vietnam; the work that is being done in maquiladoras is not going to Cleveland without NAFTA. That’s the obvious factor. The less obvious effect of NAFTA is that by eliminating barriers to trade in services, it contributed to the explosive growth of the services…

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