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Trade Imbalances
Replacing NAFTA

NAFTA should be reconstituted and replaced. The trick is how to deepen U.S.-Canadian integration without leaving Mexico completely out in the cold.

Published on: December 27, 2017
Diane Francis is the author of ten books and on the faculty at Singularity University. She is editor-at-large at the National Post.
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  • AnonymoussSoldier

    In the last 20 years America has been losing bigly. The convefe has been flowing out like the titanic after it sprang a leak. 5 million jobs expressly to growing trade deficits, arguably millions more. The wages of all 100 million Americans without any sort of college degree depressed. Of course many more if you count those with a degree of dubious value.

    How many of those 5 million jobs have been lost to growing deficits with Canada and Mexico? Growing trade deficit and misaligned currencies with those two have effectively eliminated nearly 900,000 jobs. Bad.
    Since Clintons horrendous PNTR (98) with China and it’s ascension into the WTO (late 01) the US has lost 3.4 million jobs with that mercantilist, communist state alone. Clearly, the priority is not Canada or Mexico.

    One who’s clear eyed and not owned by foreign interests, including MNCs, the priority is going after those large distorters of global trade and currency rebalancing, ie going after China, Germany, Japan, and others. You might say, “many of those are allies!” To that I would say, “you’re right, better focus on the largest offender and a non-ally, in fact, strategic competitor name of Communist Party of China (might as will name it by the regime that runs it with an iron fist).

    • KremlinKryptonite

      Makes me think of the Reagan 1986 Plaza Accord. A good idea to rebalance currencies, although it did not go far enough to address the other causes of such distortions, and of course too much damage was done in the 90s by the Clinton administration.

    • Unelected Leader

      The worst are the ones practicing corporate apologetics for the US auto industry. In reality, Japan and especially Germany prove them wrong. Both have comparable pay with America, actually greater in Germany, for manufacturing jobs. Their auto industries were not devastated because they have smarter, more mercantilist policies that keep their import to export ratio in such a critical export industry somewhat more closed. In other words, between tariffs and other barriers to entry, as well as consequences for those that outsource from their countries, they remain competitive with high wages. It’s not the wages, it’s not the robots. It’s just bad trade and bad currency policy.

      The wages of sin are death in the Bible. The wages of one way free trade are low wages and replacing decent paying manufacturing jobs with eight dollars an hour at Walmart to sell you the Chinese crud you import. America practices one-way free trade like it’s the state religion, but that’s really just because it’s good for the corporations that own America.

      • Tom

        As it happens, you’re wrong. The US auto industry was devastated because it failed to adapt new manufacturing techniques and was wedded to the idea of big, expensive gas guzzlers well into the 1980s, and because of high labor costs.
        Whine all you want about how we aren’t mercantilists and that places us at a competitive disadvantage, but car manufacturing in the American South has been a growth industry for decades. If the Big Three decided not to move there, that’s not a government policy issue, that’s a corporate stupidity issue.

      • AnonymoussSoldier

        Well you’re onto it UL. Don’t get too caught up with the wages, however. It appears you know that any complaints against wages are usually nonsense and corporate propaganda, per Japan, Korea, Germany, etc. For example, Fords average wage in 2005 was ten bucks less than your chart. It was about $26/h. That’s almost 13 years ago and pre Great Recession, too. Looking at the confluence of factors to include currency misalignment, trade policy, as well as the amount of support domestic industries enjoy can provide you with a better picture for not only the auto industry. In fact, you’ll quickly see how bad America does trade these past few decades.

        China has been the most closed, viciously protecting its top 20 export industries these past many years, leading to a very high export-to-import ratio of 4:1, and gaining all of that employment from both 97 as the chart depicts.
        Japan has been actively protecting its top 20 export industries and has devalued the yen more than 35%. With a typical 1 to 2 year lag effect, we now see the benefits for Japan with an export ratio back up to 3:1.
        Germany was somewhat more open, but still benefits unduly from currency misalignment and does protect at least its top export industries, leading to an export ratio of nearly 2:1.

        America has had an export-to-import ratio of an astonishing 90 or 91% for its top 20 export industries for many years now. In other words, America does not even enjoy a surplus in its top 20 export industries, and instead manages a 9% or 10% deficit even in those!
        These other countries enjoy their trade surpluses and healthy exports and associated jobs/wages thanks to a myriad of smart, protectionist policies (once upon a time used by America), which include strategic currency manipulation, intentional maintenance of over production capacity, subsequent dumping of that capacity, tariffs and nontariff barriers, some degree of capital controls, and other subsidies.

  • Jim Heffernan

    If this was in fact true – “the exodus of jobs from Canada and the United States to Mexico has gradually hollowed out their industrial regions” – then we wouldn’t have an illegal immigration problem in the U.S. Far too many people are laying the blame of mechanization of North American manufacturing industries on some magical job sucking developments in Mexico while the truth is somewhere in between.

  • FriendlyGoat

    Why anyone would think that Republicans will negotiate American companies’ labor costs upward in trade agreements is a great mystery of our time, especially in a lower-income-tax environment.

  • Marathon-Youth

    Do away with NAFTA! it benefits Canada and Mexico far more than America. There is a proposal to build a highway from Mexico to Canada to connect all 3 nations. This proposed highway is reminiscent to Obama’s open borders. Both strike at the sovereign nature of America.

  • Pait

    The US auto industry would not be competitive without the economies of scale afforded by Nafta. The manufacturing jobs that moved from the US to Mexico would have moved to Europe or Asia without Nafta. It is likely that many more jobs would have disappeared.

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