The re-negotiation of NAFTA
The North American Free Trade Agreement (NAFTA) was signed over 23 years ago. Between 1993-2015, trade between the three member countries – the United States, Canada and Mexico, quadrupled, from $297 billion to $1.14 trillion which boosted economic growth, profits, and jobs for all three countries. During that time, the United States increased its exports of goods from $142 billion to $517 billion. The increase in trade has boosted economic growth and jobs in all three countries. Mexico is currently the top export destination for U.S.-grown beef, rice, soybean meal, corn sweeteners, apples, and beans. It is the second-largest export destination for corn, soybeans, and oils. Similarly, 80 percent of Mexico’s exports go to the United States. U.S. tariffs on these exports would be very damaging to Mexico’s economy. Similarly imposition of tariffs on the Mexican side would hurt American farmers and exporters.
A 23-year-old agreement would conceivably need some modifications to fit the current economic scenario. But termination would be likely to result in material injury to those sectors that currently benefit from NAFTA. The result maybe the relocation of at least some of those industries outside the United States leading to greater job losses. Governments should not create winners or losers but should strive to create a level playing field for domestic manufacturers and farmers to compete with foreign competitors.
The threat of termination of NAFTA by the current Administration may be designed to put pressure on both Mexico and Canada to offer concessions. But threats may be counterproductive, as in this case, where the other two countries are aware of the benefits currently accruing to American farmers and manufacturers from NAFTA and the political compulsions associated with economic injury to those vote banks. Empty threats may destroy credibility but with the current Administration, one cannot be entirely certain that decision making will be predictable or rational. When the risk of unpredictability is factored into the assessment, an empty threat could well be perceived as a real one by the other sid
 Office of the United States Trade Representative, Summary of Objectives for the NAFTA Renegotiation, July 17, 2017 at https://ustr.gov/sites/default/files/files/Press/Releases/NAFTAObjectives.pdf
 Kimberly Amadeo, the balance, 6 Advantages of NAFTA, May 08, 2017 at https://www.thebalance.com/advantages-of-nafta-3306271