A history lesson on America’s international trade roots
Caught in the middle of a war between Britain and France, American international trade was interrupted primarily by British naval forces imposing an economic blockade on Atlantic shipments, even from nations that formally declared neutrality. After failed attempts at diplomacy with our former colonial overseers, the United States declared war against Britain to assert its rights to commerce and freedom on the open seas.
It sometimes appears these days as if we’re on the precipice of another great trade war.
Speaking before a campaign rally-style crowd in Arizona on Aug. 22, President Trump declared he thinks “we’ll probably end up terminating NAFTA, at some point.” This perhaps shouldn’t have been much of a surprise. Trump has been making declarations on the North American Free Trade Agreement since the campaign trail, when he referred to the deal as a “disaster” and “the worst trade deal in the history of this country.”
It shouldn’t be a surprise, except that formal negotiations to update NAFTA kicked off just last week. Why even go through the charade of seeking reasonable terms for the 21st century if it’s a foregone conclusion that the president intends to tear the deal up in the end? Perhaps this is all part of the president’s strategy to achieve the most beneficial terms for the nation.
The best reason to update the deal is that NAFTA has been a success. Since its inception in 1994, the deal has removed most barriers to trade among Mexico, Canada and the United States. It supports nearly 14 million American jobs, with U.S. exports to Mexico growing from $50 billion in 1994 to $231 billion in 2016. The services sector, in particular, saw a trade surplus with Canada and Mexico of $41.8 billion in 2014 alone.
Our dependence on NAFTA is clear. In April, it even prompted the president to tamp down his rhetoric. “I decided rather than terminating NAFTA, which would be a pretty big, you know, shock to the system, we will renegotiate,” Trump said at the time.
Additionally, U.S. Trade Representative Robert Lighthizer and U.S. Secretary of Commerce Wilbur Ross both have indicated in recent months that they would take a “do no harm” approach to renegotiating NAFTA, cooling fears the administration would dismantle the deal.
While the War of 1812 rendered neither side a significant victory, the outcome left the young United States able to establish its standing among the nations of the world. Out of the ashes of the burnt capital, the country was able to rebuild and in the process even acquired “The Star-Spangled Banner,” inspired by the resilience of American soldiers, and the American flag, still waving despite a night of heavy bombardment during Britain’s failed invasion of Baltimore.
Unfortunately, a contemporary trade war will not cover us in the same sort of glory. An interdependent global market will not allow the United States to exit unscathed. From the perspective of markets, terminating NAFTA, much like shutting down the government, amounts to declaring war on ourselves. Naturally, this has generated some serious legal discussionabout the proper limits on the president’s power to wage trade wars, just as there are in shooting ones, without congressional approval.
History teaches not only to avoid the mistakes of the past, but not to kill the successes of the present. It is important to remember how low we almost were wasted when the world turned against the free flow of trade, as well as the prosperity it continues to offer in the here and now.