WATCH: NAFTA, Trade Deals, and Trump
Joshua Meltzer, senior fellow for global economy and development at Brookings, discusses how the United States enters into trade agreements with other countries both for economic and security reasons. Trade deals with Canada or Mexico may generate relatively small gains for America’s large economy, but these agreements are important for regional security and economic growth.
US-Mexico trade under NAFTA has helped build a prosperous and increasingly democratic Mexico, which has a positive economic and national security outcome for the United States.
Trade opponents may highlight the trade deficit—which calculates the difference between exports and imports. Imports are not necessarily good or bad for economic growth– but it depends how imports are used. The use of imports can be a positive driver of growth: If imports are used productively—as imports to business processes—then imports make businesses more competitive, employ more people, and generate more wealth.
It’s common to renegotiate trade agreements, and NAFTA, which President Trump hopes to renegotiate, is more than 20 years old. Former President Barack Obama talked about renegotiating NAFTA in 2008, which was achieved in the context of the TPP. In those negotiations, the US gained improved market access into Mexico and Canada, without having to make any significant concessions. Rather than accepting the TPP outcome as an update of NAFTA —since both Canada and Mexico were in TPP—President Trump wants to start negotiations over.
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