Wanted: A few good free-traders
But there are recent signs that free traders are ready to stand up to the administration’s protectionist impulses.
After a long confirmation process, Trump’s nominee to be U.S. Trade Representative, Ambassador Robert Lighthizer, was confirmed last week. Given Lighthizer’s history as a lawyer for the domestic steel industry, free-traders were understandably concerned about his nomination. Now that he is leading USTR, the process of renegotiating NAFTA can begin in earnest – with a notification to Congress of the administration’s intent to move forward.
In recent weeks, Trump has publicly declared he came close to withdrawing from NAFTA, only to be convinced to try renegotiating the agreement first. In a subsequent tweet, the president suggested he would, in fact, withdraw the U.S. from NAFTA if renegotiation proves fruitless.
This would be a disastrous decision. Trade between the U.S., Mexico and Canada has grown significantly under NAFTA – from $290 billion in 1993 to more than $1.1 trillion in 2013. If the U.S. were to withdraw from NAFTA, tariffs between the three countries would likely revert back to the “most favored nation” treatment rates under World Trade Organization rules.
A recent study from Purdue University found withdrawal from the pact would lead to “declines in real GDP, trade, investment and employment,” leading to 256,000 low-skilled workers losing their jobs in the U.S. over the next three to five years. When skilled workers are included in the calculation, the study finds that unemployment would rise by more than 1.2 million.
Thankfully, there appears to be growing concern about potentially withdrawing from NAFTA and pursuing a protectionist agenda more broadly. While visiting Mexico last week, General Electric CEO Jeff Immelt offered praise for NAFTA. He told employees at a plant in Monterey that the company is “very supportive of NAFTA,” before adding that the agreement could be brought up to date. Immelt is one of the first prominent CEOs to rush to NAFTA’s defense.
Likewise, Congress and think tanks are fighting back. In late January, Sen. Mike Lee, R-Utah, introduced his Global Trade Accountability Act that would claw back to Congress much of the authority to set and raise tariffs that it had slowly delegated to the executive branch. Should Trump threaten withdrawal or make other drastic protectionist moves, expect members of Congress to rally around the bill.
Sens. John McCain, R-Ariz., and Ben Sasse, R-Neb., also sent a scathing letter to Lighthizer explaining their opposition to his confirmation. The pair stated, “America deserves a USTR who will renegotiate NAFTA in order to build on its successes, not as a pretext for unraveling it.” Though Lighthizer was ultimately confirmed, the tenor of the letter from McCain and Sasse expressed what a lot of free traders have felt since the beginning of the Trump administration.
Earlier this week, Arizona and Nebraska’s two other senators—Sens. Jeff Flake, R-Ariz., and Deb Fischer, R-Neb.,—wrote a separate letter to Lighthizer, co-signed by 16 other senators, that struck a more conciliatory tone, but ultimately offered up a robust defense of NAFTA and suggesting the administration should modernize the agreement and not abandon it.
Most recently, a broad coalition of prominent conservative and free-market organizations wrote a letter to Lighthizer encouraging USTR to pursue “thoughtful renegotiation” in order to “strengthen [NAFTA] to lower costs for businesses and consumers, while expanding market access.” Should USTR take steps to withdraw from or weaken NAFTA, the coalition wrote that they will oppose such efforts.
With NAFTA renegotiation about to get underway, free-trade policy in the U.S. is facing its most serious threat in decades. It’s clear that not everyone is comfortable with the course the administration appears likely to chart this summer. Now’s the time for weary free-traders to jump into the fray to defend this noble cause. As the saying goes, “If not now, when? If not us, who?”