As a deadline for NAFTA negotiations set by House Speaker Paul Ryan came and went on May 17, Treasury Secretary Steve Mnuchin now says that the negotiations are still alive and might even extend into next year.
Of course, President Donald Trump has undercut his senior aides before, and there is no telling what he might impulsively do if the mood strikes him. Previously, Trump had insisted that he would withdraw the U.S. from the North American Free Trade Agreement if negotiations were not concluded and approved by this session of Congress.
By delaying NAFTA talks until after the November election, however, the GOP could avoid an awkward situation in which most of the NAFTA revisions demanded by Trump’s negotiators are supported by labor and the Democrats and opposed by big business-friendly Republicans. It is another case of Trump trying to steal the liberals’ clothes with a working-class base that once reliably supported Democrats but now is more inclined to back Trump.
One key demand sought by Trump’s negotiators would kill the NAFTA provision that allows corporations to challenge ordinary domestic regulations in special tribunals as improper restraints of trade. Another would add more accurate rules of origin so that inputs substantially made in China are not credited as produced in North America.
A third would increase labor rights in Mexico. It would even require that a large share of NAFTA production be made by workers earning at least $16 an hour, to reduce job flight to Mexico.
This provision, among others, proved too much for Mexico to swallow, with that country facing its own presidential election on July 1, but it is emblematic of how the Trump administration has shifted the conversation on trade.
It’s unlikely that Trump studied NAFTA in any detail. The architect of this proposed deal is his chief trade negotiator, Robert Lighthizer. But Trump, for all his weirdness, has a keen nose for winning political symbolism.
Trump’s earlier threat to withdraw from NAFTA gave his negotiators the leverage to win surprising tentative concessions from Canada and Mexico. If no deal is reached, a NAFTA pullout may yet be a different sort of win for Trump with his nationalist base.
Otherwise, Trump’s brand of nationalism is mostly economically irrational and politically demagogic. His other trade policies are all over the map.
He has wildly oscillated between getting tough with China and proposing sweetheart deals that serve his own business interests.
His tariff orders on steel and aluminum are scattershot rather than targeted at nations that illegally subsidize their own exports. He has needlessly started a trade war with Europe as fallout from his withdrawal from the Iran nuclear deal.
But in this case, the proposed changes to NAFTA are good policy. It’s nonsensical for a North American free trade area to allow tariff-free inputs from China, which is not a party to the agreement. It is equally wrong to allow extralegal tribunals for corporations to do end-runs around national regulation. It is also reasonable to put limits on jobs fleeing to a low-wage nation, Mexico, in which workers have no effective labor rights.
The existing elements of NAFTA are not “free trade.” They amount to a special-interest deal by and for multinational corporations, which undermines the ability of the U.S. to broker a balanced form of decent capitalism.
Yet the political center—Democratic presidents Barack Obama and Bill Clinton, as well as Republicans George H.W. Bush, George W. Bush, and Ronald Reagan—promoted global trade deals that plainly served corporations at the expense of workers. That embrace gave a huge opening to Trump.
Other elements of Trump’s pro-worker stance are largely phony. His tax reform serves mainly corporations. His regulatory changes reduce protections for workers and consumers. His proposal to charge foreign health systems more for drugs would boost pharmaceutical profits and not reduce prices for American consumers.
But in a climate of resentment against weakened job opportunity, compounded by a mashup of identity conflicts, a little economic nationalism goes a long way. That Trump is able to exploit these grievances is substantially the fault of the political center for embracing a Davos version of globalism that not only undermines living standards for millions of Americans, but looks down on them as losers. If NAFTA becomes a winner for Trump, the corporate globalists have themselves to blame.
With the exception of NAFTA, the brand of economic nationalism espoused by onetime Trump adviser Steve Bannon―and by Trump’s own rhetoric―has more to do with demonizing foreigners than truly benefiting American workers. Yet there is a positive, progressive version of economic nationalism waiting in the wings. It would revise trade deals that sell out American workers, repeal Trump’s tax cut and put the money instead in large-scale infrastructure and green-transition investments.
That could produce millions of good jobs and new made-in-America technologies and industries, as well as renewed credibility for an activist government. It would be salutary to have a real debate, one that progressives could win, about what could truly Make America Great Again.