Trump Administration Submits Wish List for Trade Bloc Reform

Published April 21, 2017

President Donald Trump’s advisors have released a list of changes Trump would like lawmakers to make to the North American Free Trade Agreement (NAFTA), a trilateral trade bloc agreed to in 1994 by the United States, Canada, and Mexico.

The “wish list” includes renegotiating NAFTA to reduce the U.S. trade deficit, the difference between the total value of U.S. goods purchased by foreign consumers and that of foreign-manufactured goods purchased by American consumers.  

The Office of the U.S. Trade Representative gave the list to U.S. Sen. Pat Roberts (R-KS) in March, among documents prepared for the U.S. Senate Finance Committee’s hearing on the nomination of Robert Lighthizer to the post of U.S. Trade Representative.

Politics and Prosperity

Clifford Thies, a professor of economics and finance at Shenandoah University, says voters’ opinion of international trade tracks economic prosperity at home.

“Regarding NAFTA, it worked well when the economy was working,” Thies said. “While some jobs were lost, other jobs opened up. But as the economy has slowed down, NAFTA has come under suspicion. During the campaign, both candidates said NAFTA needed to be renegotiated. … I don’t know what either was referring to. What I know is this: Countries that have underperforming economies become inward-oriented and pessimistic.”

Taxes, Tariffs, and Trade

Thies says reducing the tax burden would benefit people more than creating tariffs or border taxes.

“We have to cut taxes in a way that is fair,” Thies said. “A lot of people don’t pay federal income tax, so reducing the payroll tax is the basic way of offsetting that concern. That’s an argument [over] why we need to concern ourselves with border taxes. Countries can influence the terms of trade with tariffs, and this means that foreign goods could be more expensive to us.”

Calls for Regulatory Reform

Caleb Watney, a master’s degree fellow at the Mercatus Center at George Mason University, says changing NAFTA’s trade terms will not help unemployed Americans find work or cause businesses to hire locally.

“If we change up the way we do our treaty agreements with Mexico, that’s not going to bring a major revitalization of manufacturing jobs back to America,” Watney said. “The best thing we can do is find ways to make it easier for workers to get reintegrated and [get] new jobs. That could mean things like job retraining programs, or making it easier to move to big cities, where there are a lot of artificial housing restrictions that make it more expensive to move into big cities.”

Watney says reducing the cost of regulations on business owners would help achieve that goal.

“We could make our economy more dynamic,” Watney said. “If we got rid of a lot of the regulations that make it hard for banks to lend or for entrepreneurs to start new businesses, that would also make our economy more dynamic. There’s a number of things you can do, … different ways that, through legislation, we could make our economy more dynamic.

“That, really is the target Trump should be focused on, if he really wants to help American consumers,” Watney said.