Q & A Discusses Trump’s NAFTA Plans

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One of President- Elect Donald Trump’s central campaign promises was the restriction of the North American Free Trade Agreement or NAFTA, The Houstonian spoke to Sam Houston State University Economics Professor Donald L. Bumpass about what Trump’s economic promises could mean for the country.

H: What is the North American Free Trade Agreement, exactly?
B: My description is that NAFTA worked to lower trade barriers for U.S., Canada and Mexico. It is a regional trade agreement that opens trade in this North American region.

H: Trump has repeatedly criticized NAFTA and promised to limit the power of NAFTA. Can he do that?
B: I’m not certain here. Changes will be made with negotiations Mexico and Canada. Some changes could result within that framework. Unilateral changes by the U.S. would seem to require input or approval from Congress.

H: How does the NAFTA work? Why do you feel it is important to have?
B: I’m a believer in the overall benefits of open trade. NAFTA moves us in the direction of more open trade. In general, I think that results in positive impact on U.S. growth and growth in Mexico and Canada. One empirical estimate found gains for Mexico and U.S. and small losses for Canada. I would not base my answer on any single study, but I think that NAFTA has been positive policy for growth.

H: One of Trump’s claims has been that NAFTA has taken American jobs away and given them to Mexico. Is that true at all?
B: Very difficult question. Short-term, more open trade is likely to displace workers. Longer term, the job displacement effect (job loss) is not an important factor.
Here’s quote from a recent New York Times article focusing on the auto sector I like:
“There are still more than 800,000 jobs in the American auto sector. And there is a good case to be made that without NAFTA, there might not be much left of Detroit at all. Even in the narrowest sense — to protect jobs in car assembly plants — a wall of tariffs against America’s southern neighbor would probably do more harm than good.”

H: Trump has said he wants to bring more of those manufacturing jobs back. Is that possible? Why or why not?
B: U.S. manufacturing production has been growing over the last decades. Jobs growth was much slower in manufacturing because of increased worker productivity. The composition of jobs, for example, number of jobs in manufacturing, is due primarily to increased worker productivity. Continued improvements in worker productivity will continue to dominate the labor markets. I don’t believe most of these jobs are “coming back”. According to a recent study [http://conexus.cberdata.org/files/MfgReality.pdf] more open trade accounted for 13 percent of the lost U.S. factory jobs, but 88 percent of the jobs were taken by robots and other factors at home.