The office of the U.S. Trade Representative released a 17-page document in July outlining the Trump administration’s goals for renegotiations of NAFTA, the North American Free Trade Agreement.
During election season, candidate Trump frequently targeted the 1994 pact, which reduces or eliminates tariffs on most goods between the U.S., Canada and Mexico. He made frequent calls to renegotiate or even eliminate the deal in order to reduce the trade deficit and restore power to American workers. This, despite the consensus that NAFTA was generally good for the U.S. economy and did not adversely impact most workers in a significant way.
A few days into his administration, Trump made good on his promise to withdraw from the spiritually similar Trans Pacific Partnership. That agreement also sought regulatory consistency on environmental and labor issues. It also included a controversial provision allowing private investors to sue foreign governments for trade violations.
This is why it is surprising that many of the new goals for NAFTA renegotiation—which can technically get underway this month but is not expected until much later—resemble aspects of the TPP. They have earned criticism from protectionists on both sides of the aisle. President Trump is using his fast-track authority to negotiate the agreement before seeking congressional approval. President Barack Obama used the same authority to hash out TPP.
So what does it say?
The NAFTA goals have drawn the most vociferous criticism for being vague. But the details that are available make it clear the Trump administration would like to see a few updates to reflect the information age. It calls for new rules to ensure free digital trade as well as services in finance and telecommunications.
Though Trump never went as far as to declare China a currency manipulator, the document calls for a rule forbidding NAFTA countries from manipulating exchange rates to facilitate exports.
The TPP comparisons largely come from sections calling for transnational regulatory compliance and consistency in labor, intellectual property and environmental matters. Those were big aspects of the TPP.
It also calls for the elimination of various trade barriers on U.S. agricultural exports, a frequent point of contention with Canada.
What the goals don’t include are any threats to impose tariffs on American manufacturers who move production across the border, or any increased tariffs on goods from other NAFTA countries. That had been a favorite Trump theme that moved some critics to warn of a potential trade war.
Bringing it home
A lot of the document’s details are highly technical, and a lot of the technical points lack detail. But business journalists can get plenty out of it by focusing on how these changes to NAFTA might affect their states.
Look at which states are the most reliant on foreign trade. The Brookings Institute has a handy guide on the dependence of various states on Canada-U.S.-Mexico trade of intermediate goods. It also examines how major overhauls to international trade deals could impact individual metro areas.
These data show the states that do the most significant import business with NAFTA countries, and therefore the ones that would be most impacted by significant changes to the trade deal. Understanding the biggest industries in your state will also help you identify specific provisions in the renegotiations that would have the biggest impact. For example, a business reporter for the Detroit Free Press would seek out any potential changes to the auto industry.
Many states do a brisk export business with NAFTA countries as well. This CNN Money story employs Census data to show that many of the country’s most populous states would be heavily impacted by big NAFTA changes. The Bureau of Labor Statistics identifies the biggest industry in each state and how each has changed over time. And remember, just because an industry isn’t directly involved in trade doesn’t mean it won’t be affected.
Reporter’s Takeaway
• The new goals call for TPP-like regulatory provisions, enhanced U.S. agricultural exports and a reduction of the trade deficit
• Localize this and give it context by focusing on how much international trade your state does and in what sectors. Offices of economic development, the U.S. Census Bureau and the Bureau of Economic Analysis can all help you with these data.
