The Perils of Mexico-Bashing

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As I have noted before, in a number of ways President Trump resembles President Obama. Both hate free trade, oppose immigration (Obama covertly, Trump ostentatiously), favor unions over consumers, and so on. Trump’s mania against free trade is on display in its most virulent form in his war on NAFTA.

NAFTA was a truly bipartisan accomplishment. Conceived and promulgated by President Reagan, the free trade agreement (FTA) between Canada, Mexico, and the United States was negotiated under Bush the Elder, approved by a large, bipartisan vote in the Senate, and ratified by Bill Clinton. And it has seen trade blossom: as of last year, US trade exports to Mexico and Canada were four times what our trade exports are to China.

But even in the primaries, Trump singled out this one FTA for a torrent of abuse, accusing both Canada and Mexico of cheating, because we have a balance of trade deficit with each. Along the way, Trump’s heavy-handed and accusatory style has helped drive Canadian and Mexican opinion of him — and the rest of us, since we elected the bird — to new lows.

NAFTA has seen trade blossom: as of last year, US trade exports to Mexico and Canada were four times what our trade exports are to China.

The renegotiations have dragged on, mainly because America keeps trying to impose onerous restrictions on its neighbors. This is another trait shared by Obama and Trump: disdain for our own allies. Love Russia, hate Canada and Mexico — how daffy can you get?

A recent Wall Street Journal article reports the latest on the NAFTA fight. The chief American negotiator, Robert Lighthizer, is introducing new absurd demands. He now wants to require that at least 40% of the content of all cars crossing the American border must come from workers earning at least $16 per hour. This is at least double the existing wages of auto-assembly workers, and four times that of Mexican auto-parts workers! Cars that don’t meet that criterion will be heavily tariffed at the border.

Trump’s intention is crystal clear: pay off his union supporters by forcing Mexico to surrender its comparative advantage (lower cost labor). This is his populist-autarkist idea of “fair trade”: make the other party do things as stupidly as you do, rather than doing things smarter yourself. Add to this his demands for a periodic renewal vote on staying in the agreement, and you have a one in-your-face-F-off-and-die populist ultimatum.

Trump’s intention is crystal clear: pay off his union supporters by forcing Mexico to surrender its comparative advantage.

This ultra-protectionist ploy is arousing opposition, both here and (more ominously) in Mexico. Free-trade Republicans — what pathetically few of them are left — are not amused. In a piece he wrote for the WSJ, Sen. Pat Toomey (R-PA) expressed annoyance with the Trumpian tactics. Trump has told the Senate — in true bossman style — which had lawfully ratified the NAFTA agreement during Clinton’s term in office — either to ratify a new, eviscerated NAFTA or see him unilaterally withdraw the US from it. Toomey says that if this ultimatum is put to him, he will vote against it and oppose in federal court the cancelation of the treaty.

Recently, Trump withdrew the US from the Iran deal negotiated by the feckless Obama. That’s constitutional, because that deal was explicitly not put forward as a treaty. But NAFTA was, and as Toomey rightly observes, the Constitution delegates the framing of trade policy expressly to Congress. The rare prior cases of a president unilaterally withdrawing from a ratified treaty never concerned a commercial treaty. I would observe that the Declaration of Independence should be consulted. I refer to the parts in which the king is accused of “cutting off our trade with all parts of the world,” not to mention “obstructing the laws for the naturalization of foreigners” and “refusing to pass others to encourage their migrations hither.”

Trump and his foolish followers clearly want to stick it to the Mexicans, and have done so since his first campaign appearances.

Holding out an olive branch, the estimable Toomey suggests that Trump focus on correcting obvious problems, such as ending Canada’s tariffs on cheese, and solidifying Mexico’s recent moves to open up its energy sector to US fracking investment. Add to that correcting a (relatively minor) sin, the current Mexican practice of putting low caps on duty-free sales of American stuff, and you pretty much have perfected the agreement; and have done so quickly, without arousing countervailing populist rage.

But Trump and his foolish followers clearly want to stick it to the Mexicans, and have done so since his first campaign appearances. The countervailing rage is rising in Mexico, where the frontrunner for the next presidential election is a populist leftist — one Andres Manuel López Obrador (AMLO), close friend of Britain’s leftist Jeremy Corbyn.

Mexico is clearly being driven to its own populist extreme — AMLO now leads by 18%, much better than he has registered before. A radicalized Mexico could easily allow Russia to set up naval bases in its waters, and allow Chinese troops to move in to help “train” Mexican troops. The Russians have shown every desire to extend their world influence, and Mexico would be an even better vehicle for that than Cuba. As to the Chinese, their recent building of bases in the South China sea, their behavior on the Indian border, their rush to build a blue-water navy, and their clearly strategically planned moves to increase their influence in Latin America all indicate a long-term game plan that is anything but tame.

A lot of good a wall would do then.




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Comments

Richard Ferris

I love free trade, but all the firms I know that have branches in Mexico tell me that to them it is a joke.
They can bring in raw materials but not much of anything else. How is that even close to free trade?

No copy paper, toner, office supplies or manufactured items seem to be included in the agreement. They ship us anything, we only ship them materials that generate jobs in Mexico.

If Trump can make it an actual free trade agreement it would be great! What we have now has little to do with free trade.

Gary Jason

Thank you for reading my piece. While i appreciate your friends' opinions, I prefer facts.

In 2017, we sold $243 billion in goods to Mexico, and they sold $314 billion to us, for a deficit of $71 billion. This trivial imbalance — in our $18.57 TRILLION dollar economy — is actually smaller when you count in services: for example, more Mexican college students come here for college than Americans go there.

By comparison, we sold China — a vastly larger economy and nation — $130 billion, and bought from them $506 billion, for a deficit of $375 billion.

We should focus on cutting free trade agreements with China, Japan, and Germany — where we run our largest deficits — than with Mexico and Canada, where we do most of our trade and run trivial deficits.

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