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‘Free but fair trade’: NAFTA, China and the India success story

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By John J. Metzler

UNITED NATIONS — Back in Ronald Reagan’s time, the underlining philosophical mantra of the extraordinary economic expansion was that “a rising tide lifts all boats.”

Namely, as entrepreneurialism and enterprise were encouraged, the results would create the rising tide of progress. But later, in the early 1990’s slowdown, President Bill Clinton rose to power on a simple but still memorable quip floated by his communications guru James Carville, “It’s the Economy Stupid.” Such remains a tried and true political dictum.

The International Monetary Fund (IMF) predicts wider global growth based on the expanding American economy. Despite the chafe and flying feathers from both Twitter storms and the usual Congressional gridlock, President Donald Trump has created the conditions for the rising tide: High Consumer Confidence, Business Confidence and both business and personal tax cuts. The stock market has soared.

Workers on a billboard in Mumbai, India.

Workers on a billboard in Mumbai, India.

The undertow of unemployment which was a bane of the previous Administration has turned and now the U.S. jobless rate stands at a seventeen year low of 4.1 percent. Significantly,
2.5 million jobs have been created, 200,000 in the crucial manufacturing sector alone. The American economy grew at an impressive 2.3 percent in 2017.

As the President touted in his State of the Union Address, “This is our new American moment. There has never been a better time to start living the American Dream.”

Nonetheless, the ill-winds of protectionism can whip up a gale even on seemingly calm waters. I’m not talking about our lopsided China trade in which last year’s deficit with Beijing reached $344 billion, only a bit smaller than the high of $375 billion in 2015.

Trade pacts have predictably come under suspicion. President Trump stated, “The era of economic surrender is over… From now on we expect our trading relationships to be fair and to be reciprocal. We will work to fix bad trade deals and we will negotiate news ones.” While specifically not mentioning China, nor the NAFTA deal with Canada and Mexico, the underlying tone echoes protectionism.

Take the North American Free Trade Agreement (NAFTA), adopted by the Clinton Administration in 1994. There’s huge cross border commerce with both Canada and Mexico.

Yet NAFTA is being renegotiated. Just a day after the State of the Union, Canada’s Foreign Minister Chrystia Freeland was here in New York and fully conceded NAFTA should be “modernized and improved.” She cited the example of cross border auto parts trade in which NAFTA provisions still deal with Cassette Decks in new cars!

Speaking at the prestigious Council on Foreign Relations, Minister Freeland views trade pacts as a “win-win” and not “a Zero-sum game; one guy wins one guy loses.” She stressed, “We really sincerely think a trade relationship is a Win-Win…Why would you Trade if it was not good for both parties? We’re kind of like Adam Smith there.”

She claimed that amid tough negotiations with the U.S. her government has a “Plan A, but we have a Plan B , C, D, E and F too.” In other words, Ottawa really wants a continued deal with Washington. Canada is the world’s tenth largest economy.

The U.S. trade with Canada stands at $535 billion with a small deficit of $15 billion last year.

Bilateral trade with Mexico reached $512 billion with a manageable deficit of $66 billion.

But China has now displaced Canada as the USA’s largest trading partner.

Viewing the bigger picture of trade and foreign policy Minister Freeland asserted, “We think the world is stronger when the U.S. is at the table.” Fully agreed.

But what of the elephant in the room?

India’s economy has seen a growth spurt and now stands proudly as the world’s fifth largest economy! The positive can do policies of the Modi government combined with the hard work and entrepreneurialism of the Indian people have brought about this milestone.

India was once shackled with burdensome state socialism; today there’s a growing commercial spirit.

India has surpassed both the United Kingdom (the former colonial power) and France to edge into Fifth Place. That’s standing in the lineup with the USA, China, Japan, Germany and India. Talk about a changing world!

Expanding U.S. trade with India has reached $68 billion with a $21 billion deficit.

Seen another way, the NAFTA deficits stand at $81 billion, again a shadow of the $344 billion imbalance with China!

While massive trade deficits pose a threat to national security as well as financial strength, free but fair trade will speed the flow of commerce and offer workers a win-win deal.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism the Diplomacy of Separated Nations: Germany, Korea, China (2014). [See pre-2011 Archives]

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