Once there was a trilateral called NAFTA, that for a while was deemed the best there was. Between three neighbors - each willing to win and all betting on a trifecta. The past tense introduction that was the first sentence, while intentional, is merely a presumption of NAFTA's impending end.
1994 was a long time time ago. Since then the seats of power in each country-member turned over a handful of times. Economic conditions changed. Political winds had swerved and swirled to alter the makeup of each other nation's hierarchy of needs and aspirations. NAFTA, like most transformational agreements created by man, had the inertia of an ocean liner. But inertia was the least of its problems. It was either three captains were steering the ship or, worse, there was no one keeping the ship on course. Furthermore, there was no course correction whatsoever, even if it was needed badly, or perhaps because nobody dared to say something. Or, was it doomed from the very start? Is that a dire assessment?
NAFTA's future should not be under threat and should survive, even flourish, had all that it was meant to do and accomplish came to be. What was its main purpose, without going through the weeds of every minutia that are in the hundreds of pages of documents churned and printed at its inception? It was meant to promote fair trade between the three nations while encouraging robust production and exchange of goods with equitable tariffs or none at all and, in the process, raise the standard of living in all three nations. In theory, that sounded good. Each member country that is producing certain higher quality goods efficiently can capitalize on that, export those goods while in return import the goods that the other members do so well themselves. Competition, that are costly by nature, for exporting and importing the same goods that each country produces can be alleviated and resources can be focused on what each does best. In theory, that sounded good. As a result, the goal is for the standard of living in each member-country to rise accordingly. Illegal immigration from Mexico will lessen, if not completely eradicated, as the standard of living rises with the rising tide in the same sea where all three trading partners float (presumably equitably). In theory, that sounded good.
But what happened?! A lot did. It was not so much as fair trade as water seeking its own level. Companies moved their manufacturing from high labor to low labor areas of production. But it was a one-way move! Moving manufacturing from the USA to Mexico was as sensible as water naturally flowing from higher elevations to the lower plains. No Mexican or Canadian manufacturing moved from there to here. Labor organizations in the U.S. suffered from job losses. The irony is that wages in Mexico did not go up accordingly. Standard of living remained stagnant south of the border. It would seem like a logic-defying phenomenon but sensibly so when per hour rate in the U.S. manufacturing sector is, say, $20, and in Mexico it was and still is at $3. Mexican workers are better off risking illegal crossing since they know even a menial job at the other side of the border is at least triple what they can get in their own country. And that is assuming they can even get a job within their border. But wait! American consumers were benefiting from lower prices on goods coming from Mexico. Yes, but how does that achieve the lofty ideals of floating on the same high tide? Is this not the same as bringing in Chinese goods from half a world away? Did we not move manufacturing from here to China as well? But the Chinese workers are not largely the beneficiary. The Chinese regime does and its military build up and its foreign expansionism are the direct result of its overflowing treasury.
That was just one example. Now, north of here is one entirely different issue. There are tariff inconsistencies on dairy and lumber products. Car manufacturers have moved there as well as it did to Mexico. Did American consumers also benefit as they did with Mexico. Perhaps. But what about U.S. exports? U.S. exporting companies complain about being disadvantaged when it comes to exporting to either country. Again, maybe. But it is true that if the dollar is strong then its exports to the two member-countries would suffer as a consequence.
And their lies the problem with the trilateral agreements of this nature. It is complicated to begin with - wage differences, currency mismatches, uneven base economies, even cultural differences - but every time there are more than two parties entering into an agreement, issues multiply with each additional participant. It is difficult enough to get a bilateral deal but with each additional participant the issues inflate with the variables associated with each additional membership. That is why even the fabled "Round Table" of King Arthur lore failed. That was an allegory about interests of several are not necessarily the interests of what was supposed to be the ideal. And then, what is ideal is in the eyes of every beholder (member). The UN is not the success its dreamers and founders hoped to achieve. The EU's shelf life is about as fragile as most multi-member organizations had and will always have. Is NATO a stable alliance? Ask Russia about the Warsaw Pact. ASEAN at the opposite side of the globe is no more a pillar of organization as the EU. The success of multilateral organizations is inversely proportional to the number of its members. Alliances throughout history have been put together by well meaning idealists. Those have all come and gone with very little to show of any enduring legacies.
Well, here we are today. A wrecking ball that is the U.S. President is deemed a bucking bronco in a China shop, all puns intended. He wants to break NAFTA and by the looks of it, HAFTA is how he goes. And it looks like Canada is not going to play ball. Immediately, the press calls the President out. What he is doing is madness, and in a few instances declared him mad by those not even in a position to write up a psychoanalysis report.
Is what he is doing madness? Or, are we failing to see a certain method to this "madness"? Well, let's see. A few weeks into his presidency, pundits practically ruled in World War 3. Economists thought the market was going to tank, the economy ruined, and the administration will fail at every turn. Some are lashing out madly and passionately. But, is it not that the madness that is filling the air is how detractors feel and harbor because none of what is happening today has been observed before? We can question what the President is doing and that is the right of every citizen. But, of course, it is as much a prerogative of a leader to do what he or she does as it is the responsibilty of the two other branches of government to provide the checks and balances that will counter-weigh the actions of the President; and ultimately by the power of the people at the polls when the time comes, of course.
We will not have good answers, at least not simple ones, to the complexities of all that are happening. However, we can explore what if any can be potentially a favorable outcome. Should we not at least try to see if governments can plug the loopholes that were in the agreement? Chinese manufactured parts are finding their way into Mexico that ultimately get into the finished products that are then exported to the U.S.? Is Mexico taking advantage of cheap (likely also inferior) parts from China to reduce their costs? It is bad enough that Chinese goods are populating store shelves here already. Has the U.S. been too lackadaisical in the past when its wealth provided much cushion to feel the ill effects of a handful of wrong decisions but now it is discovering the layer of protection has now been eroded to the bone?
Bilateral agreements can be complicated but trilateral and multilateral agreements can be more so. Doesn't it make sense that the needs of two countries and what each can offer the other better negotiated and managed by a bilateral contract? No two nations are the same. Relationships are better understood and addressed one-on-one than when all three or more are trying to fit everything under one blanket.
All of these are not lost to the policy makers in China. They should be worried because a strong trading partnership with a neighbor that shares a border with the U.S. is going to be remarkably efficient and a bilateral contract is a stronger bond. That is the reason China wanted TPP and WTO. They can operate with stealth and opacity effectively where attention can be distracted too easily.
Perhaps we see madness. Perhaps we see a method to the madness. Perhaps we are seeing that multilateral deals are maddeningly and singularly the wrong way to do trade agreements. The U.S. will HAFTA go this way.
1994 was a long time time ago. Since then the seats of power in each country-member turned over a handful of times. Economic conditions changed. Political winds had swerved and swirled to alter the makeup of each other nation's hierarchy of needs and aspirations. NAFTA, like most transformational agreements created by man, had the inertia of an ocean liner. But inertia was the least of its problems. It was either three captains were steering the ship or, worse, there was no one keeping the ship on course. Furthermore, there was no course correction whatsoever, even if it was needed badly, or perhaps because nobody dared to say something. Or, was it doomed from the very start? Is that a dire assessment?
NAFTA's future should not be under threat and should survive, even flourish, had all that it was meant to do and accomplish came to be. What was its main purpose, without going through the weeds of every minutia that are in the hundreds of pages of documents churned and printed at its inception? It was meant to promote fair trade between the three nations while encouraging robust production and exchange of goods with equitable tariffs or none at all and, in the process, raise the standard of living in all three nations. In theory, that sounded good. Each member country that is producing certain higher quality goods efficiently can capitalize on that, export those goods while in return import the goods that the other members do so well themselves. Competition, that are costly by nature, for exporting and importing the same goods that each country produces can be alleviated and resources can be focused on what each does best. In theory, that sounded good. As a result, the goal is for the standard of living in each member-country to rise accordingly. Illegal immigration from Mexico will lessen, if not completely eradicated, as the standard of living rises with the rising tide in the same sea where all three trading partners float (presumably equitably). In theory, that sounded good.
But what happened?! A lot did. It was not so much as fair trade as water seeking its own level. Companies moved their manufacturing from high labor to low labor areas of production. But it was a one-way move! Moving manufacturing from the USA to Mexico was as sensible as water naturally flowing from higher elevations to the lower plains. No Mexican or Canadian manufacturing moved from there to here. Labor organizations in the U.S. suffered from job losses. The irony is that wages in Mexico did not go up accordingly. Standard of living remained stagnant south of the border. It would seem like a logic-defying phenomenon but sensibly so when per hour rate in the U.S. manufacturing sector is, say, $20, and in Mexico it was and still is at $3. Mexican workers are better off risking illegal crossing since they know even a menial job at the other side of the border is at least triple what they can get in their own country. And that is assuming they can even get a job within their border. But wait! American consumers were benefiting from lower prices on goods coming from Mexico. Yes, but how does that achieve the lofty ideals of floating on the same high tide? Is this not the same as bringing in Chinese goods from half a world away? Did we not move manufacturing from here to China as well? But the Chinese workers are not largely the beneficiary. The Chinese regime does and its military build up and its foreign expansionism are the direct result of its overflowing treasury.
That was just one example. Now, north of here is one entirely different issue. There are tariff inconsistencies on dairy and lumber products. Car manufacturers have moved there as well as it did to Mexico. Did American consumers also benefit as they did with Mexico. Perhaps. But what about U.S. exports? U.S. exporting companies complain about being disadvantaged when it comes to exporting to either country. Again, maybe. But it is true that if the dollar is strong then its exports to the two member-countries would suffer as a consequence.
And their lies the problem with the trilateral agreements of this nature. It is complicated to begin with - wage differences, currency mismatches, uneven base economies, even cultural differences - but every time there are more than two parties entering into an agreement, issues multiply with each additional participant. It is difficult enough to get a bilateral deal but with each additional participant the issues inflate with the variables associated with each additional membership. That is why even the fabled "Round Table" of King Arthur lore failed. That was an allegory about interests of several are not necessarily the interests of what was supposed to be the ideal. And then, what is ideal is in the eyes of every beholder (member). The UN is not the success its dreamers and founders hoped to achieve. The EU's shelf life is about as fragile as most multi-member organizations had and will always have. Is NATO a stable alliance? Ask Russia about the Warsaw Pact. ASEAN at the opposite side of the globe is no more a pillar of organization as the EU. The success of multilateral organizations is inversely proportional to the number of its members. Alliances throughout history have been put together by well meaning idealists. Those have all come and gone with very little to show of any enduring legacies.
Well, here we are today. A wrecking ball that is the U.S. President is deemed a bucking bronco in a China shop, all puns intended. He wants to break NAFTA and by the looks of it, HAFTA is how he goes. And it looks like Canada is not going to play ball. Immediately, the press calls the President out. What he is doing is madness, and in a few instances declared him mad by those not even in a position to write up a psychoanalysis report.
Is what he is doing madness? Or, are we failing to see a certain method to this "madness"? Well, let's see. A few weeks into his presidency, pundits practically ruled in World War 3. Economists thought the market was going to tank, the economy ruined, and the administration will fail at every turn. Some are lashing out madly and passionately. But, is it not that the madness that is filling the air is how detractors feel and harbor because none of what is happening today has been observed before? We can question what the President is doing and that is the right of every citizen. But, of course, it is as much a prerogative of a leader to do what he or she does as it is the responsibilty of the two other branches of government to provide the checks and balances that will counter-weigh the actions of the President; and ultimately by the power of the people at the polls when the time comes, of course.
We will not have good answers, at least not simple ones, to the complexities of all that are happening. However, we can explore what if any can be potentially a favorable outcome. Should we not at least try to see if governments can plug the loopholes that were in the agreement? Chinese manufactured parts are finding their way into Mexico that ultimately get into the finished products that are then exported to the U.S.? Is Mexico taking advantage of cheap (likely also inferior) parts from China to reduce their costs? It is bad enough that Chinese goods are populating store shelves here already. Has the U.S. been too lackadaisical in the past when its wealth provided much cushion to feel the ill effects of a handful of wrong decisions but now it is discovering the layer of protection has now been eroded to the bone?
Bilateral agreements can be complicated but trilateral and multilateral agreements can be more so. Doesn't it make sense that the needs of two countries and what each can offer the other better negotiated and managed by a bilateral contract? No two nations are the same. Relationships are better understood and addressed one-on-one than when all three or more are trying to fit everything under one blanket.
All of these are not lost to the policy makers in China. They should be worried because a strong trading partnership with a neighbor that shares a border with the U.S. is going to be remarkably efficient and a bilateral contract is a stronger bond. That is the reason China wanted TPP and WTO. They can operate with stealth and opacity effectively where attention can be distracted too easily.
Perhaps we see madness. Perhaps we see a method to the madness. Perhaps we are seeing that multilateral deals are maddeningly and singularly the wrong way to do trade agreements. The U.S. will HAFTA go this way.
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