A one-time school project gone terribly, terribly wrong.

28 February 2008

A Quick Thought About Hillary, Barack, and NAFTA

Hillary and Barack have both been making war-talk on NAFTA. Both, campaigning in the job-drought-stricken rust belt of Ohio, home of shuttered auto plants and smokeless factory chimneys, intimated that they would "re-visit" NAFTA, the North American Free Trade agreement.

Unfortunately, I believe the rhetoric the candidates are employing is actually empty. But if it isn't, it's an opportunity to pause for thought.

Myself, I say go ahead. I personally think NAFTA wasn't a bad deal for Canada. Most importantly, we got an actual grievance mechanism to settle trade disputes with, rather than the old method of sending it up the pipeline through higher courts and levels of government until everyone gave up in disgust.

However, I don't feel the US has played particularly fairly in trade generally, especially the softwood lumber sector (which was, I hasten to point out, specifically excluded from NAFTA). There have been instances in steel and beef as well.

Canada ships out raw materials and ships some of them back as value-added goods. With the economic downturn in the US (and I'm guessing it'll take at least three years for the US economy to recover, if it ever does--$11 trillion is a big debt hole, and that's even before you add the US-China trade imbalance), we need to expand our trading beyond our traditional market, the US, and our other big partner (regrettably, China).

If NAFTA went in the crapper, US energy prices would skyrocket. We have agreements to sell hydro, gas, and oil, water and other resources in place, many under the NAFTA framework. Say "buh-bye".

Canada, faced with a patchwork of tariffs and duties, and slapping reciprocal duties on imports of manufactured goods, would have to rebuild a manufacturing sector for all those goods we haven't yet sourced from China and India.

Instead of shipping raw lumber and logs south, maybe we could rebuild our furniture industry; re-open some of the mills that have shut down and re-tool them for manufacturing. Our auto sector won't change because most of our car "manufacturing" actually consists of screwing on the bumpers and antennae of vehicles shipped in from Korea (including a number of famous "Japanese" cars as well. Japan has "outsourcing" too). It'll drop though, because the US will start importing cars directly--possibly building a bigger auto assembly industry of its own. Instead of shipping iron and steel to China, where it gets made into Wal-Mart lawn furniture, shipped to the US and thence to Canada, we could make it here.

Sure, prices would climb, but maybe it'd slow down the relentless, breathless cycle of consumer debt and irresponsible consumption.

As to staple goods, well Canada has proven quite capable of producing its own food in the past. Yes, you'd no longer be able to buy three litres of orange juice for five bucks, but I feel it distorts the hell out of agriculture, economics, and trade when a country that can't grow oranges at all imports quadrillions of litres of the stuff even in the depths of winter. The environmental costs? Don't get me started; I used to drive trucks for a living.

All these value-added vineyards I see out my window would probably be half-replaced with apple orchards. Apple juice--it's what's for breakfast.

But we wouldn't starve. And we'd be able to start growing a larger variety of crops again becuase a tariff regimen would make domestically produced food more competitive.

So if the candidates really mean what they've been saying on this, okay. And if not, well that's okay too.

The biggest losers would probably be the industries of Mexico. The steel producers, the maquiladora factories, the farms raising food for export.

One thing that abrogating NAFTA would do for certain is establish once and for all whether derestricting trade actually brings any real benefits. Let me be clear, I believe that for the most part it does. But I'd love to see the principle really get tested in a place where we eagerly adopted free trade.


At 3:14 p.m., Blogger Wandering Coyote said...

When I saw this Hilary/Barak/NAFTA thing on the news, I was like, "Ooooooh...Go ahead. Make my f*cking day!" I was resentful that they implied that they feel that the US has been given the ass end of that deal. I actually think WE got the ass end of the deal and couldn't believe they were ballsy enough to be complaining about it.

At 11:04 p.m., Blogger Metro said...

Like most bilateral deals, there was what a Jewish friend called "a little joy, a little oy" in NAFTA.

Initially it was cheaper for companies to manufacture here. Then came China and India.

On the other hand, the US bought energy from us because we have an enormous surplus.

Abrogating NAFTA probably won't do a lot of good, is my bet, but I'm more than willing to try and see what happens.

I'm not certain I know of any situation short of war in which trade liberalization has been reversed.


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