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NAFTA’s Failures Finally Get Air Time, Thanks to Trump

NAFTA’s Failures Finally Get Air Time, Thanks to Trump

The last time Mexico took center stage in American politics was Sept. 6, 2001, when George W. Bush watched Mexican President Vicente Fox address a joint session of Congress in the nation’s capital.

Bush and Fox were friends, ranchers, businessmen, and came from the same rugged landscape that made their working together a done deal.

Both men were determined to take the North American Free Trade Agreement (NAFTA) to the next step by addressing the limitations and flaws in that agreement. The limitations were political (no free movement of people across borders) and economic (no single currency for the United States, Canada, and Mexico).

George W. Bush envisioned an administration that would work to make the United States, Canada, and Mexico more competitive on a global scale.

It’s important to recall why NAFTA was created in the first place: as a response to the European Union (EU). The EU sought to make Europe an economic powerhouse: economic coordination, a single currency, the laissez-faire movement of labor across borders.

As someone involved in the discussions surrounding NAFTA, I understood that there would be market failures: Without a development bank, how would displaced American workers be retrained for new jobs in the IT economy? Without comprehensive immigration reform, how would a porous border be made to operate in a way that responded to needs of people and seasonal economic fluctuations?

In 2004 I wrote a book that offered policies to mitigate NAFTA’s shortcoming. The book, NAFTA’S Second Decade: Assessing Opportunities in the Mexican and Canadian Markets, was well-received. But none of its recommendations were ever implemented.

What happened?

Five days after Vicente Fox received a standing ovation in the halls of Congress, terrorists struck on the morning of Sept. 11, 2001.

Bush’s ambitious NAFTA plans were scrapped as the United States launched a War on Terror. Throughout 2002, the United States rallied support for war. In March 2003 the United States invaded Iraq. When my book came out, greater integration with Canada and Mexico—which implied loosening borders—was the last thing anyone in Washington cared to consider.

Now, 15 years later, NAFTA’s market failures and structural limitations have festered sores that Donald Trump has masterfully pointed out.

Trump’s rhetoric against Mexico—building walls, deporting millions, seizing remittances—have caused alarm among Mexican officials. An “Emergencia Trump” has been declared: Mexico’s president replaced its ambassador in Washington, sending in a tough, no-nonsense diplomat who is expected to speak up against Trump, an advertising campaign to improve Mexico’s image among the American public has been launched, and politicians are scrambling for “what if” plans should Trump enter the White House.

But Trump has also started a conversation about what is good about NAFTA, what is bad about NAFTA, and what needs to be changed.

It’s a discussion that George W. Bush could not entertain because of his War on Terror. It is a topic that Obama, ineffectual and indifferent, did not express any interest in pursuing.

The reality is that the festering market failures of a limited NAFTA cannot long continue. Specifically:

• A North American Development Bank: The EU has an institutional mechanism to ameliorate labor disruptions occasioned by free trade. When Trump complains about Whirlpool, Ford, and Nabisco shifting production to Mexico, the real issue is the absence of a mechanism to retrain American workers. In today’s globalized economy, production goes where labor is more efficient. No yelling is going to bring those jobs back and international agreement prohibit the implementation of tariffs, unless a trade war is Trump’s goal.

• Building a wall is a reflection of frustration with a broken immigration system. Our immigration system divides families, frustrates employers, and creates bureaucratic nightmares. The onerous immigration system and the general deterioration in the quality of life in the United States since 2001 are two reasons we are witnessing a reverse migration: Mexicans living in the United States are leaving. And when Trump speaks of “porous” borders, he alludes to the what some see as the real border crisis: Mexico’s inability to secure its own southern border with Guatemala, a route used by millions of Central Americans fleeing gang-related violence. The “illegals” are mostly non-Mexicans entering the United States after they cross illegally into Mexico. Canada and Mexico have an immigration agreement for seasonal workers that functions as a model.

• War on Drugs: The proposal to address the drug crisis by legalizing some drugs (marijuana) and decriminalizing others (cocaine) would begin the process of ending drug cartel violence in Mexico and drug addiction in the United States. Tens of thousands of innocent Mexicans have been killed over the past decade in an endless war on the cartels. An even greater number of Americans have died from drug addiction, overdose, or violence. An integrated approach, perhaps based on the experience in Portugal or the Netherlands, would set the stage for a rational approach to drug production, consumption, and addiction.

• Unintended consequences of NAFTA’s economic dynamics: One unintended consequence of NAFTA has been a health crisis. The proliferation of highly-processed foods and greater workplace stress have changed how people in all three countries eat. When NAFTA was implemented in 1994, no one thought that, two decades later, the United States would be confronting an obesity epidemic and Mexico a diabetes crisis. How globalization affects the health of the people who live in the NAFTA nations is a public health issue that needs to be addressed.

Perhaps it’s time to tackle the unfinished business of NAFTA. Addressing the imperfections and market failures is something that everyone should welcome.

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