Donald Trump has said he will make changes to our international trade agreements, including the China agreement and NAFTA. If he doesn’t do anything else but this he will have done more for this country than George Bush and Bill Clinton did to harm this country by authoring and getting the NAFTA passed into law by Congress.
What is NAFTA?
NAFTA stands for the North American Free Trade Act. and is an agreement between Canada, US and Mexico. There were side agreements added by President Clinton before becoming law these are:
1. North American Agreement on Environmental Cooperation
2 Commitment to Labor Cooperation
Who was responsible for these agreements? The NAFTA agreement was actually authored By George HW Bush. He failed to get re-elected and could not sign it into law. After promising that he would not, Bush’s successor Bill Clinton signed NAFTA and revisions into law in 1992 to be effective in 1994.
Representatives approved NAFTA on November 17, 1993, by a vote of 234 to 200. The agreement’s supporters included 132 Republicans and 102 Democrats. NAFTA passed the Senate 61-38.
The signatories were President William Clinton, Canadian Prime Minister Brian Mulrone and Mexican President Carlos Salinas de Gortari.
It has been said that the NAFTA idea actually goes back to the Lyndon Johnson presidency but never became a law.
All countries need trade agreements. There are “Trade agreements” and there are “Free trade agreements. The difference is that “Free Trade agreements eliminate tariffs for merchandise being imported into a country. The purpose of trade agreements is to promote international trade but should not be so drastic as to harm businesses in the United States.
Trade agreements involving the United States should be implemented to establish competitive trade between two or more nations, but caution must be taken not to enter into a trade agreement that is so one sided that whole industries within the United States are disadvantaged to the point of going out of business. Trade agreements must be authorized by Congress. Although it is generally agreed that the result of Trade and Free Trade agreements is not only to encourage out of country businesses to seek to sell their wares internationally, but to encourage fair competition. High Tariffs placed on incoming goods to the United States can prevent the foreign goods from being priced competitively. No Tariffs (Free Trade) placed on incoming goods to the United States can make goods produced within the United States noncompetitive even if sold in the United States.
Current Free Trade agreements with China, Taiwan and Mexico stipulate virtually no tariffs on goods coming from those countries. How has that affected the US Consumer? It has nominally lowered prices on products, it has forced many US business to go out of business, and it has resulted in the loss of US jobs as a result of closed business but more than that, these Free Trade agreements encourage US businesses to relocate out side of the United States to remain competitive and or strengthen their profits. Its a balancing act and our Trade agreements with China and Mexico are out of balance and need to be either negated or re-negotiated to stop the decades of migration of our American businesses out of the United States.
The long term outlook of this action might mean rising prices on some products, but the balance is that we would encourage foreign businesses to relocate into the United States which means jobs. It would mean that our current US businesses would turn larger profits and that also probably means more jobs. When our work force is doing well financially, so is our economy.
In 1984, Congress passed the Trade and Tariff Act. That gave the President “fast-track” authority to negotiate free trade agreements more freely. It eliminated Congressional input to the ability to approve or disapprove. Congress lost the ability to change negotiating points. NAFTA and the Chinese agreement replaced this “fast track” authority.
The purpose of NAFTA was to designate Canada and Mexico as countries who enjoyed “Most Favored nation status” in import/export matters. It intended to eliminate barriers to trade and facilitate cross-border movement of goods and services, promote conditions of fair competition and increase investment opportunities. It also provided protection and enforcement of intellectual property rights. (In reality the Chinese have never honored these rights)
NAFTA was supposed to create procedures for the resolution of trade disputes and establish a framework for further trilateral, regional and multilateral cooperation to expand the trade agreements benefits.
The question is who, exactly do these trade agreements benefit today.? Do they benefit big business or the consumers who live in NAFTA countries? Generally speaking, the mainstream media ,who have dubious motivations, claim that NAFTA has benefited the jobless, lowered unemployment rates and generally is responsible for lower costs of goods and manufacturing. They claim NAFTA is responsible for quadrupled trade figures, lowered prices, increased economic growth, job creations, increased foreign direct investment in Canada and Mexico, and reductions in government spending by allowing inter governmental contract awards that increase competition resulting in a reduction in the cost of Government expenditures.
The icing on the NAFTA mainstream media cake is the threat that if the NAFTA trade agreement were changed or negated the result would be the end of low cost manufacturing in Mexico, a reduction in Mexican exports to the United States and Canada and would undercut American workers sent to Mexico to implement American manufacturing. There is also the suggestion that Mexico might refuse to renegotiate in the face of Mexican export tariffs levied against Mexico and Canada. Canadian exports are primarily fossil fuels. Are these claims, by the National media, of profit, and wonderful economic conditions created by NAFTA accurate? It would appear not.
Although the NAFTA agreement basically eliminates tariffs on goods crossing the borders from Canada and Mexico into the United States, it’s a fact that Mexico has and is currently imposing tariffs on all goods imported into Mexico from the United States. The minimum tariff is 16% on most goods but is increased on some goods. Mexico pays no tariffs on goods exported to the United States. The US government has “looked the other way” on the Mexican tariffs on imported goods from the US.
The practice of allowing countries to have no tariff charges on goods entering the United States is not unique to the NAFTA agreement. A similar and more beneficial agreement to a foreign country exists within the Chinese Taiwan/United States agreement. This agreement is known as the Asia-Pacific free trade agreement. In 2015 China sent 366 billion dollars more in goods than the United States sent to China. This trade agreement also gave the Chinese unheard of shipping concessions on goods after arriving in the United States. China on the other hand has avoided paying established port fees in the United States by shipping goods including automobiles manufactured in China to the Ensenada Port in Mexico. It is reported that this port is actually owned by the Chinese and thus its likely that the Chinese port fees are negligible. In Mexico, China can take advantage of the NAFTA agreement between the US and Mexico and ship the Chinese goods via Mexican trucking companies, North across the US Mexico border. It appears in this case there is no benefit to the United States working force but great benefit to US Businesses who receive goods from Mexico and China from the Mexican Ensenada port at lower costs and sell their products in the US at much the same price as if it were manufactured in the United States. The low cost of goods has not been passed on to the consumer.
The US price of consumer goods produced by US industry is not relative to consumers in Canada or Mexico. The cost of products in US dollars is the same in Mexico and Canada as it is in the United States no matter where the goods are manufactured. Mexican factory workers get paid much less but the cost of the vehicles and other goods they produce for the United States is the same as if it were produced in the United States. What this means is that as indicated in the chart on the rising cost of vehicles. A vehicle purchased by a Mexican or Canadian from a United States distributor for $10,000 will cost the same amount in Canada or Mexico as it does in the US, plus tariffs. The only difference is the dollar exchange rates.
The question is answered. NAFTA didn’t do any of the above listed intended benefits to any of the consumers in the three countries except make it legal for industry to make more money using cheap labor in third world countries. The prices went up and in most cases the cost of labor to produce went down. The US consumer is paying the same amount of money for a new car after NAFTA as he would have been paying had NAFTA never existed except that now he probably doesn’t have a job and more.
This scenario is not unique to the Automobile industry. Canada has the approval to construct pipe lines across the United States to the refineries on the gulf thanks to NAFTA. Gas prices have climbed up just the same as if there were no pipe lines across our country. Mexico and China are manufacturing and shipping goods to the United States and selling as if the items were made in Detroit or New York and don’t even afford the courtesy of passing through US ports. If you shop in JC Penney, Walmart or Macys, the prices have not decreased even though the products come from Tiawan, China or Mexico. How can a US Steel mill compete when China can make a steel product ship it to the US, pay little or no tariff and then ship the item to your door for the price of a US postage stamp?
Our friends in Mexico have been falsely convinced by the Mexican and US media that the NAFTA agreement has and is providing them with jobs and opportunities that would not exist without NAFTA. They do not realize that they are being used by their own government who in effect has made it possible for greedy businesses in the United States to benefit from near slave labor to produce products for shipment to the United States tariff free. This arrangement with Mexico is one reason why the United States government has tried to convince us that its necessary to stop the Mexican people from migrating to the United States in search of employment. It is not because the Mexicans are stealing US jobs or because the Mexican people are shipping drugs across the border. The United States government is known to have bought and sold significant amounts of drugs itself during CIA operations and it has been said that the US is one of the largest illegal drug dealers on the planet.. The border closure is because industrialists in the United States do not want the Mexican people to get familiar with wages paid in the United States. Why would a Mexican worker perform his work in Mexico for 10.00 per day when the same job in the United States pays 10.00 per hour and is only required to work 8 hours per day, received insurance, vacations etc: ? The same goes for those in the clothing and other Mexican industries. Yes there are jobs in Mexico created by US manufacturing located there for those who chose to bite the United States pie, but the rest of the Mexican people and the people of the United States do not benefit from NAFTA and in the big picture, neither do the Mexican people who work like slaves for industry owned by United States businesses because the prices of goods shipped into Mexico from the United States are higher than in the US after including the Mexican Tariffs. The prices of goods shipped into the United States from Mexico and China are tariff free, but these savings are not passed on to the American consumer. The prices of these goods remain the same as if they were manufactured in the United States. Who benefits from these Free Trade agreements? The consumer or big business?