Trade In The Era Of Trump

D. S. Mitchell

As an epic economic and diplomatic tour, empty-handed. His tactics of insult and bullying did not play well.

Here in the United States there is white knuckle fear that NAFTA will once again become central in Trump’s great trade experiment. Of course, there are valid points made by the administration. There is trade imbalance, but most US industries are looking for a few tweaks, not abolishment of a treaty that has produced many benefits for US industry and farmers.

NAFTA, the North American Free Trade Agreement, is a 1994 pact between Canada, US and Mexico. I’m from NW Oregon and many Mexican markets were opened to Northwest wheat growers. In fact, exports increased by 400%. At the same time many of these farmers have complaints about Canadian wheat pricing. You can’t make everybody happy, but that does not mean these folks want to tear up the historic treaty.

Everybody wants to keep what works and fix what doesn’t. Anytime you start re-negotiating you are at risk that the other country’s desired fixes will cause major problems. That’s what negotiations are about, however Trump does not conduct normal negotiations. Trump’s threatening the outright cancellation of NAFTA  puts political theatrics and rhetoric ahead of effective negotiating tactics.

In October, dozens of agricultural trade groups warned the Trump Commerce Department that withdrawal from NAFTA would cause “immediate, substantial harm to American food and agriculture industries and to the US economy as a whole.” The threat of abrupt turnaround in US trade policy has our trading partners looking around for options for sales and purchases elsewhere. China, for example.

If Trump withdraws from NAFTA most agree it would create problems for the United States, particularly in Trump’s staunchest support base, the American heartland. Treaties take years of behind the scenes negotiating before they are unveiled for public perusal. Tearing up agreements is not good trade policy.

In 1987, Trump, with the help of Tony Schwartz, wrote the “Art Of The Deal”. Schwartz has since declared Trump to be “delusional”.  In the book, there is an 11 point formula for negotiating. Step 5 is “use your leverage”. In other words, be ready to walk away, if you can’t get what you want. My view here, is that if you have no working trade partnerships, you have no leverage.

According to Trump in 1987, “The worst thing you can possibly do in a deal is seem desperate to make it. That makes the other guy smell blood, and then you are dead,” Sounds like a theory that may or may not work in real estate but is fault based in the in the 2017 globalized economy.

The threat of Trump abandoning trade treaties to gain leverage, or he will walk away in the hope of making it better at some future time in the future, makes no sense. Trump tearing up  treaties or threatening to tear up treaties is a clear danger to US trade.

Calamity Politics is a progressive on-line news magazine that offers commentary and opinion on the political headlines of the day.

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