WSJ Editorial on Consequences of a NAFTA Withdrawal
October 19th, 2017
The Wall Street Journal recently published an editorial about the consequences if President Trump withdraws the United States from the North American Free Trade Agreement. The people that stand to suffer the most from terminating NAFTA are the President’s own voting base.
Some of the key takeaways from the editorial include:
- Withdrawing from NAFTA would be one of the worst economic mistakes made by a U.S. President in recent memory.
“Mr. Trump’s obsession with undoing NAFTA threatens the economy he has so far managed rather well. The roaring stock market, rising GDP and tight job market are signs that deregulation and the promise of tax reform are restoring business and consumer confidence. Blowing up NAFTA would blow up all that too. It could be the worst economic mistake by a U.S. President since Richard Nixon trashed Bretton-Woods and imposed wage and price controls.”
- The United States’ automotive industry depends on NAFTA to stay competitive in a global world.
“It’s hard to overstate the damage that ending NAFTA would inflict on the U.S. auto industry. Under NAFTA, companies tap the comparative advantages of all three markets and have created an intricate web of supply chains to maximize returns. As Charles Uthus at the American Automotive Policy Council said last week, NAFTA “brings scale, it brings competitiveness, it brings efficiencies [and] synergies between all three countries, and it brings duty-free trade.” Its demise would be “basically a $10 billion tax on the auto industry in America.”
- Millions of Americans rely on trade with our NAFTA partners. Terminating NAFTA would threaten all of these jobs and a large number of America’s small businesses, too.
“…14 million American jobs rely on North American daily trade of more than $3.3 billion. “The U.S. last year recorded a trade surplus of $11.9 billion with its NAFTA partners when manufactured goods and services are combined,” the letter said. “Among the biggest beneficiaries of this commerce are America’s small and medium-sized businesses, 125,000 of which sell their goods and services to Mexico and Canada.”
- The consequences of withdrawing from NAFTA would be devastating for U.S. farmers. Free access to markets in Canada and Mexico is crucial to their success.
“Ending NAFTA would be even more painful for U.S. agriculture, whose exports to Canada and Mexico have quadrupled under NAFTA to $38 billion in 2016. Reverting to Mexico’s pre- NAFTA tariff schedule, duties would rise to 75% on American chicken and high-fructose corn syrup; 45% on turkey, potatoes and various dairy products; and 15% on wheat.”