For Trump, It’s Time for "NAFTA 2.0"

For Trump, It’s Time for "NAFTA 2.0"

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On September 6, 2001 Mexican president Vicente Fox addressed a joint session of Congress in the nation’s capital. George W. Bush promised to work to take NAFTA to “the next level,” meaning additional agreements to ameliorate the shortcomings in the present agreements.

Both leaders knew these shortcomings would result in “market failures” that would harm both countries.

Less than a week later, the U.S. was attacked on September 11.

The Bush administration became a war presidency, and Mexico fell by the wayside. His successor, Barack Obama, never showed much interest in fixing NAFTA’s shortcomings.

And, fifteen years later, these “market failures” produced a ground swelling of anger among the middle and working classes throughout America’s Rust Belt that propelled Donald Trump to the White House.

What happens next?

That depends on what the U.S., Canada, and Mexico want to do: fix this trade agreement or scrap it altogether.

It’s important to revisit how NAFTA came into being. A response to the creation of the European Union (EU), the North American Free Trade Agreement was designed to make the U.S., Canada, and Mexico more competitive. But Washington didn’t want to go as far as the EU: no common currency, no open borders, not “North American Parliament.”

Another omission—a North Development Bank that would compensate and retrain affected workers—was also scrapped.

Without a mechanism for ameliorating market failures, the U.S. has experienced deterioration in the standards of living outside normal economic cycles. The states Donald Trump turned from blue to red—Pennsylvania, Ohio, Iowa, and Wisconsin—reflect the disaffection of Americans living in the states that have suffered because of NAFTA.

These voters, far from being bigots and xenophobes, are decent, plain-spoken people who have been neglected. George W. Bush was too busy prosecuting the “War on Terror,” and Barack Obama was dismissive of their plight.

Donald Trump seized on their anger and patriotism—and turning attention to the unfinished business of NAFTA is in order.

Rather than seeing this as a calamity for Mexico, it should be as an opportunity.
Barack Obama began each term indifferent to Mexico. Come January 2017, Trump’s focus will be on Mexico—and Canada.

This is an opportunity to decide whether to stay the course—and perfect NAFTA, or whether to scrap the agreement and each country go solo.

Money talks, and the economic integration among the NAFTA countries exceeds $1 trillion. Donald Trump may have envisioned tearing up the trade deal, but he will find it more sensible to correct its market failures.

And each country has concerns that have been long-neglected.

In Mexico, for example, NAFTA allowed cheap American agricultural products that put hundreds of thousands of small farmers out of business. Their children had to move to large cities—or migrate, often illegally, to the U.S. Worse still, the changed dietary habits unleashed an epidemic of diabetes and coronary disease.

In the U.S., a feckless and pompous political class ignored the hardships that American workers whose jobs were shipped to Mexico suffered. Whenever Ford or Maytag closed shop in the American Midwest, a familiar pattern unfolded: laid off workers, most of whom were not retrained, used their unemployment checks, became under-employed, went on welfare—and then descended into depression and despair. Is it any wonder there is an opioid and heroin epidemic in the American heartland?

The Obama administration was complicit in looking away. Is it any wonder that this election is a complete repudiation of his administration by White working class America?

Mexican politicians and social commentators are not aware of the anguish of the millions of Americans who have lost out because of NAFTA. All they hear are the apparently-bigoted rhetoric Donald Trump used to make his case.

When Donald Trump descended the escalators at Trump Tower in New York to announce his candidacy for president on June 16, 2015, one paragraph in his speech stood out: “The U.S. has become a dumping ground for everybody else’s problems … When Mexico sends its people, they’re not sending their best. … They’re sending people that have lots of problems, and they’re bringing those problems with us. They’re bringing drugs. They’re bringing crime. They’re rapists.”

Enrique Krauze, a Mexican historian, bemoaned that “for Mexico and the United States, Mr. Trump’s victory is a great tragedy. But Barack Obama’s eight years of benign neglect han't been such a great thing.

The Obama administration failed to deliver comprehensive immigration reform, a North American Development Bank, a resolution to the endless War on Drugs, assistance on securing Mexico’s southern border with Guatemala, stopping the flow of guns into Mexico, or nurturing bilateral progress on border environmental issues.

Indeed, it is an opportunity to have an American president in the Oval Office who wants to pick up the phone and speak with Mexico’s president to talk about solving problems. It is an opportunity to invite the young, dynamic, and intelligent Canadian Prime Minister Justin Trudeau join that conversation. It is an opportunity to speak honestly and assess, two decades after it was implemented, on what’s good about NAFTA, what’s bad about NAFTA, and what needs to be done to make this agreement work better for everyone.

And this includes not just the CEOs and shareholders who have profited handsomely from outsourcing, but the rank and file workers throughout the American heartland, the good, decent, hardworking people who want to have the chance at having better lives. 

Louis E. V. Nevaer is the author of The Rise of the Hispanic Market in the United States (M. E. Sharpe) and Nafta’s Second Decade (South-Western).


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