He promised to cut the trade deficit with Mexico but it’s actually getting bigger. Other than getting Mexico to pay for that border wall, also not happening, this was Trump’s signature border promise, the root of his complaint about NAFTA. Trump has also generally botched relations with both Mexico and Canada, both of which are crucial to Texas. As in a lot of things, Trump can’t be trusted with trade, despite his new agreement he calls USMCA. So Congress should pull the plug on it.
Trump’s proposed new agreement is nothing more than a branding exercise that changes the name and comes up short on the substance. Most of organized labor has said it can’t pass without major improvements. After a quarter century of complaints about trade’s effect on the environment, the new deal doesn’t address any concerns. There is practically zero risk for Congress in shelving USMCA; trade with Mexico and Canada continues, even now, under NAFTA.
Let’s go back to the beginning. In the early 1990s, when the ambitions for free trade were strategic and global. The North American Free Trade Agreement came right after the Cold War. Free, global trade was America’s way of stitching together soft power in which alliances were held together by the almighty dollar, not bundled beneath the nuclear umbrella. NAFTA was a dry run for a global system which would someday include China.
NAFTA was sold as a panacea. President George H.W. Bush described its purported miracles to me in an interview. It began, however, as a nightmare. The agreement helped triggered a violent uprising in Mexico on Jan. 1, 1994, the day it took effect; I was there in the southern state of Chiapas as the conflict unfolded. It also triggered catastrophic effects, mostly south of the border. I was there for those, too.
Although economists have largely found that the net effect of NAFTA for America’s economy has been positive, many hundreds of thousands of workers lost their jobs. The effects in Mexico were even more pronounced. Poverty soared, nearly doubling in two years. Farming was decimated as government broke up a nearly century-old legal system of ejidos, communal lands. Individual campesino farmers couldn’t compete with U.S. agribusiness behemoths. Some 2 million Mexican farmers and small business owners were without work — and many without homes.
Yet bit by bit, a rosier portrait emerged. Trade grew year over year. This year, Mexico became America’s top trading partner, ahead of China. Mexico’s economy has quadrupled in size. Poverty has fallen dramatically and the middle class has expanded steadily. No longer the major source of unauthorized immigrants, Mexico is — in economic terms, if not yet in terms of security — a far better place for Mexicans to stay.
Enter Trump. His major beef in 2016 was the fact that the United States exported less than it imported. All along, through either ignorance or mendacity, he tangled up immigration through Mexico with trade relations with Mexico.
As president, that confusion has persisted, but the net effect has been hostage-taking. He has taken all North American trade hostage to his personal, political interest. He threatened late last year to cancel NAFTA and create a regional crisis that would either accelerate negotiations or collapse them. He threatened to cut Canada out altogether over an obscure dairy squabble that affected only his Midwestern supporters. This year, he threatened an all-out trade war with Mexico, violating NAFTA, over immigration through its territory.
In entangling trade and immigration, Trump failed miserably at both. The Mexicans never paid for his wall, and he will get only a miniature version by trampling the Constitution, as when declared a national emergency on the border and seized funds appropriated for the military to begin construction. He has certainly failed to lead the North American trade relationship. And he has certainly failed in his own solitary trade goal with Mexico — to lower the annual trade deficit.
So far this year, Mexico has exported nearly $241 billion in goods to the U.S. and imported just $173 billion in American goods, according to Census Bureau figures. At the same time, Trump has shaken the very foundation of North American supply chains with his interruptions and threats. He has hurt investor confidence. And investors prize certainty above all else.
Boosting investor confidence and ensuring a stable trading relationship — wasn’t that the whole point of NAFTA in the first place? It is also true, by the way, that Mexico’s president, Andrés Manuel López Obrador, entered office having rattled investors, too. But the leftist hasn’t held a torch to Trump when it comes to destablizing his nation’s economy. It is Trump’s presidency, after all, that has been dedicated to burning down institutions, trade included.
In Texas, as in other states, business leaders have pushed their elected leaders to lobby Congress to just go ahead and pass Trump’s USMCA anyway. Republican Gov. Greg Abbott was pressed into service, reliably tweeting: “The USMCA is essential to the future of Texas, America, and our North American allies. Congress must pass this agreement and usher in a new era of economic prosperity.”
Tony Garza, President George W. Bush’s former ambassador to Mexico, and banker Dennis Nixon have made similar arguments. But they and the many other leaders pushing for approval of the USMCA are conveniently overlooking just how badly Trump has smashed up the relationship with Mexico; disrupted life and business along the Texas border with his bridge closures and swelling detention facilities; and insulted and hurt millions of people of Mexican ancestry with his embrace of white nationalism.
Well, enough really is enough. Trump has nearly destroyed the relationship with Mexico, writ large. Our priority must be to repair that relationship. Going back to first principles, North American trade isn’t just a means for everybody to make money. It is in the strategic interest of the people of the United States.
The likelihood that Congress will approve the USMCA before the winter holidays is already low. House Speaker Nancy Pelosi has said she supports it, but liberals are pushing back. The AFL-CIO has vowed to defeat it without major changes, too. If Congress cares about U.S. jobs, it ought to listen to labor’s concerns.
A third reason for Congress to block the new deal? There is no hurry. Trump never canceled NAFTA, so if no new deal is approved, the old deal will continue — unless Trump were to pull out and end a deal through which $1 billion in goods cross the U.S.-Mexico border each day, bound north and south by truck, rail and airplane. That’s not likely given Trump’s lame-duck status, at least unless he were to win re-election.
Does the growing trade deficit with Mexico really matter? Probably not in the long run — except as a sign of Trump’s incompetence. If you want free trade to succeed, Trump is not your guy. Overall, Trump’s disastrous hand on the tiller of global trade — from Mexico to China to Europe — is helping to slow the U.S. and Texas economies, according to the Federal Reserve Bank of Dallas.
So, it’s time for Congress to put a stop to USMCA. Shelve it. Kill it. Geeze. The guy had one