The Office of US Trade Representative requested comments from interested parties regarding a June 27, 2017 hearing regarding NAFTA Renegotiations. This is CPA’s official written testimony submitted in response.
Summary
The US needs to rethink trade agreements and unilateral trade policy options to better connect them with improved trade performance through increased US production, wages, and broadly shared economic prosperity. The NAFTA renegotiation process is a chance to do so.
NAFTA, the North American Free Trade Agreement, has caused significant economic harm to the United States. America’s trade deficit with both NAFTA signatory countries has mushroomed and US wage growth has stagnated for non-college educated workers. This result shows that mere reciprocal tariff reduction, or even disproportionate tariff reduction by Mexico, does not automatically translate into improved trade performance.
Currency manipulation/misalignment and global consumption tax distortions are more meaningful to US trade deficits and economic health than trade deals and should be addressed first. America’s overall objectives for NAFTA renegotiation should include (a) reducing the trade deficit, (b) growing the US goods production base, (c) improving wages and (d) growing our economy. CPA suggests more detailed objectives below.
The United States should not be afraid to walk away from and terminate NAFTA if our national economic interests are not achieved. Tariff rates will not rise due to mere NAFTA withdrawal without further government action. US law, which was supplanted by NAFTA and other trade agreements, can fill most all gaps left by any elimination of NAFTA rules especially given America’s market power derived from being the world’s largest economy and importer.
CPA’s testimony below includes an economic review of NAFTA (Section 2), recommended renegotiation objectives (Section 3) and a discussion of post-NAFTA trade policy options in the event of withdrawal (Section 4).
