On January 20, 2017, newly inaugurated President Donald Trump signed an executive order to withdraw the United States from the Trans-Pacific-Partnership. A couple of days later, Trump signed another executive order but this time against the North American Free Trade Agreement (NAFTA). Both of these agreements played major factors in both the United States domestic and international trade markets. As of right now, many in not only America, but the entire world are concerned with the possible after effects of these moves. While the true effects of these decisions won’t be felt until years later, the possible repercussions on foreign and internal business should undoubtedly be explored.
Before one dives into the possible issues with withdrawing, or even negotiating deals that have been in place for years, it’s important to understand the history behind these trade agreements and what countries are involved. The Trans-Pacific-Partnership (TPP) began as simple negotiations in 2002 between three nations; Chile, New Zealand, and Singapore. Overtime more and more countries began to join in on the discussions for a more broad trade agreement but nothing ever came up in writing due to disagreements in agriculture, various investments, and intellectual property. It wasn’t until February of 2016 that a final agreement came forth between twelve countries. These countries included New Zealand, the United States, Vietnam, Singapore, Chile, Brunei, Australia, Canada, Japan, Malaysia, Mexico, and Peru (Granville). At the time, it appeared to be the biggest free trade proposal in history, as these counties make up roughly 40% of the world’s economic output. The catch with the agreement however, is that all twelve nations had to ratify it, meaning that since the United States has backed out, the deal cannot become official. The TPP had many goals but the highlights include eliminating tariffs between member countries, promoting deeper economic ties, and to create closer economic policies and regulations. It also ultimately aimed to create a single market between its members, very similar to what the European Union does.
The North American Free Trade Agreement, on the other hand, has older roots than the TPP. Signed into order in 1994 by President Bill Clinton, the deal included three countries; the United States, Canada, and Mexico. It had been in the works since the late eighties, when the Reagan administration first drafted the framework for it. The deal is closely related to the goals of the TPP in that it aims to promote free and easy moving trade throughout the three nations. It does this by also eliminating tariffs and allowing easy access across borders.
While both NAFTA and the TPP initially look good on paper, there are many who disagree with them, including President Trump. Trump was even quoted as saying, “Trade deals are absolutely killing our country – The devaluations of their currencies by China and Japan and many, many other countries, and we don’t do it because we don’t play the game”(Rosenfeld). Of the many problems people have with these trade agreements, a significant one is its impact on the job market. Since the implementation of NAFTA, for instance, about one million American jobs have been lost to both Canada and Mexico (Wallach). Similarly, regarding the TPP, job loss is also a potential threat to the U.S. as many manufacturing jobs would likely depart overseas in exchange for cheaper wages and goods. The $181 billion abysmal trade deficit that NAFTA has created is also a problem that faces the U.S. Workers rights is an issue between these trade agreements as well because under both NAFTA and the TPP, labor rights and protections don’t have to be enforced. This would leave millions of international laborers in terrible working conditions and allow foreign nations to pay their workers less. Yet another way these are looked down upon points at the environmental neglect the agreements present. Neither of the two enforce climate change commitments, which could enable foreign companies to have environmentally damaging plants or factories. This, in turn, could also encourage U.S based companies to move overseas to avoid regulation and penalties if they were to stay domestic.
Despite strong opposition and potential consequences of the two, there are also many who view the free trade agreements as a good thing for both international and internal business. One major positive that could be lost without NAFTA and the TPP is cheaper goods for consumers. This is due to the fact that since many of these countries workers would be paid much less compared to American workers, the goods that they would produce would become much cheaper for them to sell. This is already the case with China and U.S. trade but the TPP would allow other cheap laboring countries (like Vietnam and Brunei) to send their cheap goods more easily to other member countries. An argument can be raised to include that cheaper goods would help average households to have more money in their pocket and therefore help their overall well-being, the goal of free trade. It would also give the United State more choices overseas as far as trading goods and prices. Others will argue that the elimination of tariffs will only help U.S. exports, which in and of itself could promote more U.S. jobs (Walker).
With Donald Trump moving in on free trade, it’s easy to see the uncertainty that is going around with the markets. While the pros and cons both seem convincing and yet debatable, one thing is for certain, only time will tell if these actions will defend themselves.