Trump will need Democrats’ help to rework NAFTA

Flipping Ohio, Pennsylvania, Wisconsin, and Michigan into the Republican column was critical to Donald Trump’s election victory, but he’ll have to work with congressional Democrats to deliver on key trade reforms he promised that won those voters.

Consider his omnipresent pledge to renegotiate the North American Free Trade Agreement (NAFTA). In a grand irony, President-elect Trump will be the beneficiary of the Fast Track authority enacted in 2015 thanks to the congressional supporters of the very trade agreements Trump hates.

That means Trump can unilaterally launch NAFTA renegotiations, determine the pact’s contents and sign and enter into it before Congress gets a vote. Then, Trump can force Congress to consider the done deal in 90 days with normal committee process and amendments banned, Senate debate and supermajority voting rules suspended.

But Trump still must build a majority in favor of his new NAFTA in the House and Senate. Congressional Republicans overwhelmingly support the model of trade agreements Trump says he wants to change.

Those agreements have little to do with eliminating real trade barriers, such as the tariffs that the 1995 World Trade Organization deal largely eliminated.

Rather, the agreements set expansive non-trade rules that determine who wins and loses in the global economy. These (often protectionist) terms reflect the interests of the 500 official U.S. trade advisors representing corporate interests who have had a privileged role in developing our past trade deals, including NAFTA.

Those same interests happen to be the funding base of the congressional Republicans.

But if a NAFTA renegotiation has any chance to satisfy Trump’s stated goals of reducing the trade deficit and countering job offshoring, it will be necessary to eliminate the very terms that the congressional GOP and their corporate allies support.

For instance, NAFTA was the first U.S. trade agreement to include the Investor State Dispute Settlement (ISDS) process, an investor protection regime that makes it safer and cheaper for U.S. firms to offshore jobs to low wage countries, like Mexico.

It empowers a foreign investor to sue a government before a panel of three corporate lawyers to obtain uncapped sums of money from taxpayers (they can even demand compensation for potential loss of future profits) when a firm believes the policies or actions in the country to which they have relocated violate the special foreign investor privileges that NAFTA grants them.

These offshoring incentives that congressional Republicans love have got to go. It should be the investors’ skins, not ours and other countries’, that should be in the game. If a firm wants to relocate to Mexico, then part of the price is self-insuring against possible losses.

NAFTA’s ban on Buy American procurement preferences and requirements that call centers and other outsourced government services employ Americans would also need to be eliminated, or U.S. tax dollars will be offshored to create jobs in other countries.  

NAFTA and other trade agreements falsely equate government procurement to private sector trade, but the choices made by governments are policy decisions determined through democratic processes that should not be constrained in trade agreements.

If Americans want their tax dollars reinvested at home when the government purchases goods — as has been U.S. “Buy American” procurement policy since the Roosevelt administration — or that workers on government construction projects be paid “prevailing” wages, then taxpayers should be free to make such determinations.

But, the congressional GOP just stripped strong “Buy American” provisions from the recently passed water infrastructure bill.

There are also terms the congressional GOP oppose that must be added. Mexico’s manufacturing wage is $2.50 an hour.

The absence of effective labor and environmental standards in NAFTA creates “race-to-the-bottom” incentives for U.S. firms to offshore production to Mexico and hits U.S. firms and workers with imports subsidized by environmental dumping.

If the goal is to counter offshoring, a NAFTA renegotiation must level the playing field. That will require effective enforcement that conditions trade benefits on countries adopting, maintaining and rigorously implementing the policies needed to meet the standards of the International Labor Rights Conventions and Multilateral Environmental Agreements.

Next, there are terms that Democrats oppose that must not be added. Congressional Republicans view NAFTA renegotiation as a way to extend one of NAFTA’s most protectionist elements — limits on competition that bring down medicine prices for consumers.

They want to implement the intellectual property protections for the pharmaceutical industry found in the Trans-Pacific Partnership (TPP) that are more extreme than those in NAFTA.

Trade agreements should not require countries to enact monopolistic “rent-seeking” protections for specific industries. Nor should they undermine governments’ ability to negotiate prices with pharmaceutical firms, as the TPP did.

But even if Trump disagrees, as a policy matter, to enact a NAFTA renegotiation, eliminating the existing medicine-price-gouging terms in NAFTA will be essential. Adding more of the same would be fatal.

That is the lesson of the TPP’s demise. Since its February 2016 signing, the Obama administration could never build a majority to pass the TPP — a deal based on the NAFTA model. Almost every congressional Democrat and a significant minority of the GOP opposed it.

Renegotiating NAFTA to remedy the issues that united those congressional TPP opponents is Trump’s path to enacting his promised NAFTA fix.

That means not trying to satisfy the majority of congressional Republicans who support the investor, procurement and other terms generating the NAFTA damage Trump has spotlighted.

It also means not alienating the large bloc of congressional Democrats who have long demanded a new trade pact model that harvests the benefits of expanded trade without incentivizing the offshoring of U.S. jobs and tax dollars, the undermining of U.S. wages and the undermining of consumer and environmental protections.

Vice President Biden’s former Chief Economist Jared Bernstein and I published an overview of that alternative approach. The bottom line — if Trump really wants trade deals that are better for working people, he will have to work with Democrats to get there.

Lori Wallach is the director of Public Citizen’s Global Trade Watch. She has testified on NAFTA, WTO, and other globalization issues before 30 U.S. congressional committees and been a trade commentator on MSNBC, CNN, ABC, Fox, CNBC, C-SPAN, Bloomberg, PBS, NPR and numerous foreign outlets.

The views expressed by contributors are their own and not the views of The Hill.