In 1993, the year before the North American Free Trade Agreement took effect, the United States exported to Mexico almost $73 billion in today's dollars worth of goods. This year, U.S. firms will export roughly four times that amount to Mexico.
And, thanks to the deal just unveiled in Congress to pass the USMCA, there's every reason to expect that number will grow.
Free trade has become unfashionable in the Trump era, with even conservatives talking up the value of industrial policy and trade barriers as economic or national security measures. But this welcome deal for passage of the USMCA serves as a reminder that even though NAFTA was not perfect, it dramatically improved the lives of the average Mexican, Canadian, and American alike.
This is the way the world works. Free trade tends to work to everyone's mutual benefit, and it will keep doing so.
Despite the various ups and downs that the economy has experienced since NAFTA took effect in 1994, U.S. real per-capita GDP has increased by 50%; Mexico's has increased by 26%. Both nations have seen their living standards improve, but the improvements in Mexico are more jarring because they started off so much worse.
Mexican living standards, firmly in Third World territory 25 years ago, have risen to the point that Mexican illegal immigration is no longer a top-tier concern, not even for the most hardened immigration hawks. According to the World Bank, the average Mexican now produces twice as much net wealth as the average Guatemalan or Salvadoran and nearly four times as much as the average Honduran. The fact that Mexico has had a closer and longer-lasting trading relationship with its northern English-speaking neighbors is not coincidental to this development.
Free trade is counterintuitive. By the individual primitive survival instinct, man strives for some degree of self-sufficiency in his dealings. But trade has, throughout history, lifted up and rewarded those nations that dared open themselves up. The British, Japanese, South Koreans, Americans, and Chinese, each in their own turn, have discovered this to their great benefit, and other nations such as Vietnam continue to do so today.
Likewise, there is a price associated with the abandonment of free trade principles. One such price Americans are paying comes in the form of huge subsidies to farmers. These growers were previously capable of paying their own way. They fed the world and put food on their own tables in the process. But the tariff war with China has turned them into government dependents, at least temporarily.
Conservatives should recognize the tragedy in this example. Even if the U.S. dispute with China centers around justifiable national security concerns, as some argue it does, it is important to acknowledge that it is still making Americans poorer. Those government payments to farmers are a tacit admission by the Trump administration that trade protectionism is a natural enemy of jobs and growth.
The USMCA, on the other hand, represents a win for everyone, and especially for President Trump. It may confer a political benefit on him and his reelection effort, but this effect is the result of the common good that the trade deal serves.
Meanwhile, Trump should continue to negotiate more such deals — with China, with the Pacific nations, with continental Europe, and with post-Brexit Britain. As a candidate, Trump claimed during the 2016 election that he is not against trade deals, only dumb trade deals. Here is his chance to make good on that promise and to make his own reelection more likely in the process.
REPRINTED FROM THE COLORADO SPRINGS GAZETTE
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