Both Obama & Clinton want to renegotiate NAFTA. Why?

[JR]

I didn't see this anywhere else so I assume this is new.

http://www.theglobeandmail.com/servlet/story/RTGAM.20080227.wprimarydebate27/BNStory/usElection2008/home

I'm not sure why this is on the agenda. The treaty's 15 years old now and even as one who was against it originally---but not for the reasons you'd suspect--by and large it's been a boon to the three economies.

The stated impetus of reducing trade barriers is of course, a crock of ****. since the US has regularly violated both the spirit and the terms of the agreement and has even been rebuked by the WTO. (cf, lumber, softwood). And, of course, the Byrd amendment was the most egregious example of flouting international trade laws.

And if the US decided to renegotiate, the one card Canada has is oil .

We are the single biggest energy supplier to the US and under the terms of NAFTA there is guaranteed American access to Canadian oil.

Our Trade Minister, David Emerson has said that this sweetheart deal for our oil will be on the table if the treaty comes up for renegotiation.

I don't know. It seems to me like a political can of worms.

 

[Fenian_Bastard]

Re: Both Obama & Clinton want to renogitiate NAFTA. Why?

It's mostly looking south. The Maquiladores have been an embarrassment to everyone here.

 

[JR]

It's mostly looking south. The Maquiladores have been an embarrassment to everyone here.

No, I understand that. But you can clean that up without redoing the entire treaty.

You were around back then. That damn thing was the most contentious political issue since Quebec sovereignty.

 

[TheSportsPredictor]

Sending all those NHL teams here really pissed off the Democrats.

 

[JR]

Sending all those NHL teams here really pissed off the Democrats.

And they want to repatriate the Blue Jays. :)

 

[dixiehack]

Honestly, 2/3 of Americans who ***** about NAFTA probably don't know that Canada's even involved. It has become an easy shorthand for displaced blue-collar workers to complain about their jobs down at the mill having gone poof. They're all convinced that the textile mills and assembly plants would magically spring back to life here if it wasn't for damned ole gubment shipping their jobs to Mexico. (Many of these people will simultaneously ***** about all the Mexicans coming here to steal all the jobs, logic notwithstanding.) What they don't realize is that any jobs that left just made a pit stop in Tijuana before heading over to New Delhi or Shanghai.

 

[Boom_70]

It's mostly looking south. The Maquiladores have been an embarrassment to everyone here.

As Fenian said it is mostly to do with Mexico part of agreement.

Original projections called for US to have trade surpluses with Mexico of upwards of 20 bil or so. Instead we have deficits approaching 100 bil.

It came up last night in debate because Ohio is one of states that was adversly affected by NAFTA.

It's funny that Hilary wants to separate herself from NAFTA yet claim that her experience of being in the White House for 8 years is why we should vote for her.

It turns out that Ross Perot and Pat Buchanan were right about NAFTA. Can you hear the sucking sound?

 

[Stoney]

by and large it's been a boon to the three economies.

That all depends on who's buttering your bread. Try telling the citizens of once-prosperous now-dying industrial towns across the upper midwest that NAFTA was a boon to their economy. But you better duck right after you say it. NAFTA helped create countless closed factories and decimated local economies throughout Michigan, Ohio, Indiana, and elsewhere.

Now the shareholders of the companies that shut down those shops might loving it. It meant cheaper labor and higher profits for them. But for the workers, not so much.

 

[JR]

I don't think you can just blame NAFTA for the loss of jobs to Mexico although that certainly jump-started things.

At the time, China was just starting to flex its muscles and North American manufacturers were heading their in droves to take advantage of slave labour wages.

In some ways it was the perfect economic storm.

The trade deficit with Mexico is a drop in the proverbial bucket compared to the deficit with China.

And Boom, whoever projected trade surpluses with Mexico was an economic idiot. It was never going to happen.

The biggest danger with NAFTA (from a Canadian perspective) was never just about the loss of jobs; it was giving up our sovereignty over natural resources i.e. oil and water.

 

[cranberry]

I think the point is that all international trade agreements should have labor and enivironmental standards. Please don't take this personally SportsJournalists.com Canada.

 

[JR]

I think the point is that all international trade agreements should have labor and enivironmental standards. Please don't take this personally SportsJournalists.com Canada.

You won't get any argument from me about that.

 

[GB-Hack]

I think the point is that all international trade agreements should have labor and enivironmental standards. Please don't take this personally SportsJournalists.com Canada.

You won't get any argument from me about that.

Absolutely.[crossthreading]

 

[amraeder]

OK, this seemed like the logical place to put this. It's it's D_B, well, I'd say I'm sorry but I'm not.

http://www.time-blog.com/swampland/2008/03/the_nafta_debate.html

Just wondered what people's takes on this were.

 

[Fenian_Bastard]

I posted this on another thread.
http://talkingpointsmemo.com/archives/181206.php

This could be the first real gaffe.

 

[amraeder]

I posted this on another thread.
http://talkingpointsmemo.com/archives/181206.php

This could be the first real gaffe.

That's why I said I'm not really sorry if it's D_B, b/c there's so many damn poli threads, looked around and didn't see it. What thread is it on?

 

[The Big Ragu]

How about actual free trade instead of managed trade?

Different countries have different opportunity costs of production of various goods and services. Comparative advantage is a real phenomenon, and if we ever had anything REALLY approaching free trade, without the protectionism, the tariffs, the export subsidies, the favorable treatment given to various industries and the government meddling, it would benefit both parties--as uninhibited trade ALWAYS does. People who haggle with each other without interference always work out the best deal possible for each side.

Also, free trade does not have to mean balanced trade, which is what people ignorantly pine for. Trade deficits are not a bad thing by their very nature and can actually be a very good thing. Cheap imports have kept inflation in check for 25 years in this country.

Contrary to popular belief, trade deficits are not caused by unfair trade practices or our inability to compete. They are a function of the flow of capital across borders and that has a lot more to do with country's savings and investment rates than unfair trade practices (whatever defines "unfair."). It's why "trade policy," which is really just people ****ing things up, has been proven over and over again to be ineffective at managing a trade deficit--which doesn't have to be managed, anyhow.

At the same time the U.S. Trade deficit has skyrocketed--and we have run them every year since the mid 70s, U.S. industrial and manufacturing output has increased significantly. You'd never realize this by listening to bull****ting politicians or protectionists with lousy ideas.

Our industrial and manufacturing output has seen gains in the 20 to 30 percent range just since the early 90s, which is proof that there has been no such "sucking sound." It's actually possible to have managed trade, as NAFTA gave us, and for our economy to prosper. Imagine that. Our economy has grown quite nicely, despite the disregard for what is right under people's noses.

Whenever there is an announcement of a rising, or record deficit, it is immediately presented as bad news. Throughout the 90s and early part of the 2000s, those announcements were usually accompanied by positive inflation, employment and growth news. The hysteria over trade deficits and the attention they receive defies logic. You'd think people would look at our economic growth and conclude that we have done fairly well. We can be prospering like all hell and it's almost like some kind of reflexive jingoism kicks in.

Wrong ideas about trade are simplistic and appeal to ignorant protectionist ideas. Trade has to do with investment flows and ultimately a country's attitudes about saving and investment, not trade policy or competitiveness. Look at our relationship with any of our trading partners and this is easy to follow.

In any case, restricting imports to the U.S. market hurts us--it's a formula for inflation and hurting consumers in their pocketbooks. I wish people would realize that you can't reduce a trade deficit by bullying other governments or through some kind of government-run policy, managed trade or export subsidies, which often fly under the euphemism of boosting "competitiveness." As if you can make things competitive by putting restrictions on people.

Screw NAFTA. But even if it is managed trade, with ridiculous terms and conditions, and not free trade, it's hardly been a problem for our economy.

Worst of all is the hypocrisy. Rather than explaining to people that their ideas are ignorant, politicians play to the ignorance. Hillary Clinton could support NAFTA, vote for it unequivocally every chance she got... but now she is against it because blue collar workers in Ohio don't understand that protectionism hurts them, it doesn't help. And rather than point that out, she's all too happy to play the populist. Just what we need.

 

[JR]

All trade is "managed", so I'm not sure what Ragu's point is about "free" trade other than some ideological wish list that has never existed and never will. Countries have "managed" trade since Moses wore short pants.

International trade isn't some garage sale where people "haggle" with each other over the price of an old bike. It's slightly more complicated than that.

And I'd be interested in knowing the "ridiculous terms and conditions" imposed by NAFTA?

It's a trade treaty, agreed at through negotiation where each party (i.e. the governments) are interested in protecting their own interests and those of their constituents.

The boondoggle in NAFTA (other than a complete disregard of labour and environmental proctections) is that the impetus for the US wasn't "free trade" but unfettered access to Canada's oil and water. Oh, and the U.S flaunts NAFTA whenver it sees fit.

 

[The Big Ragu]

Some of what you said is true. All trade is managed--in practice. It doesn't mean it has to be that way, certainly not to the extent it is. In fact, even if every trading partner we have put restrictions on trade with the U.S., we'd still benefit from cutting down the layers of barriers we have set up. We'd even end up with a competitive advantage as the end result.

The real North American free trade agreement, as visualized by the founders of the country is in Article 1 of the Constitution:

"No tax or duty shall be laid on articles exported from any state. No preference shall be given by any regulation of commerce or revenue to the ports of one State over those of another: nor shall vessels bound to, or from, one State, be obliged to enter, clear, or pay duties in another."

It's that simple. Compare those 50 or so words to NAFTA, which took 2,000 pages to come up with a "free trade" agreement. 900 of those pages are devoted to tarriff rates--yet it's a "free trade" agreement. The agreement created dozens of international bureaucracies, which are incompatible with free trade.

Is managed trade preferable to outright bureaucracy and crony-inspired, or outright corrupt protectionist policies that line people's pockets? Sure. Is NAFTA anything approaching free trade -- even if we will always end up with some form of managed trade in reality? Not even close.

 

[JR]

Well, actually, it's NOT that simple.

First of all, I assume in the Constitution that the authors were talking about trade between States, not countries.

Secondly, international trade is a tad more complicated than it was when the constitution was written.

The objectives of NAFTA, as set out in the preamble are pretty straightforward even if one thinks it's window dressing:

1. The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation treatment and transparency, are to:

a) eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties;
b) promote conditions of fair competition in the free trade area;

c) increase substantially investment opportunities in the territories of the Parties;

d) provide adequate and effective protection and enforcement of intellectual property rights in each Party's territory;

e) create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and

f) establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

And I'm not sure what you're talking about when you talk about 900 pages of tariffs. Under NAFTA there are no duties for goods originating i.e manufactured in one of the NAFTA countries (Canada, US or Mexico) and shipped to one of the other NAFTA countries.

What is laid out--in fair detail--is what constitutes an originating good under NAFTA. The treaty was never meant to include non NAFTA manufactured goods and the spirit and thrust of the treaty is to promote manufacturing within the three countries and resulting trade.

So, if you produce a widget in the US. and ship it to Canada, it's automatically duty free; however, if you're an American wholesaler and purchase the same widget from a Chinese manufacturer and ship it to a Canadian company, there is no duty free status because it doesn't fall (as it shouldn't) under the spirit of NAFTA.

You can call the document bureaucracy or you can call it an attempt to protect the interests of the member countries.

The biggest problem with NAFTA between the US and Canada is that the US has frequently not lived up to its obligations as far as the dispute resolution is concerned i.e. softwood lumber.

 

[The Big Ragu]

JR, Of course the constitution just deals with the U.S. and the relationship between the states. I was referring to how simple it is to really spell out free trade, not imply that the U.S. constitution laid the groundwork for a global economy or international trade 225 years later.

The preamble you cut and paste is window dressing when half of the document actually establishes barriers rather than eliminating them. Why does it take 2,000 pages to create open and free trade? And if the "free trade" in the name of the act isn't just somewhat empty rhetoric, why is so much of the document dedicated to laying out a system of tariffs and barriers--most of which were concessions to various industries that had the most powerful lobbying interests?

I am not being simplistic to imply that there aren't complexities when countries deal with each other. But this really should be about citizens dealing with each other, not governments dealing with each other.

My point is that when you start setting up conditions to "protect the interests of the member countries," by definition you have set up conditions -- so it is no longer, free, unfettered trade, it is trade with lots of conditions. That is always to the detriment of the economies it simplistically is trying to protect.

It really is simpler than you are representing it. I understood the concept when I was swapping baseball cards in my junior high school cafeteria. If I liked the trade, I made it. If I didn't, I held out for the deal I wanted. And eventually, me and my friend made a trade that we each were happy with. It's a concept most children understand; yet by adulthood, we have lots of people saying, "It's NOT that simple," when there is no reason for it to be as complicated as we make it.

I am not against NAFTA, in so much as its brand of managed trade is better than the disorganized system of cronyism and politically-motivated protectionist policies we've had that were even worse than what NAFTA created. But from a rational standpoint, all economic evidence has taught us that people limit their wealth and spending power with restrictions and barriers, which NAFTA is chock full of... yet we (and just about everyone) still cling to protectionist ideas that fly in the face of reason.