By Rewon Shimray | Staff Writer
Trump administration is set to move forward on a trade deal with Mexico excluding Canada. There is a growing urgency to reach a final deal before Mexican President Enrique Peña Nieto leaves office on Sept. 30.
Baylor professors have advised against a bilateral trade agreement without Canada.
The North American Free Trade Agreement (NAFTA), a trilateral trade negotiation between the U.S., Mexico and Canada, went into effect in 1994. In January 2017, Trump signed an executive order to renegotiate NAFTA. The U.S. made a preliminary deal with Mexico in August.
Lourenço Paz, associate professor of economics, said the biggest effect of NAFTA was “liberalized manufacturing,” which allowed imported and exported goods to be exchanged without high barrier tariffs.
NAFTA has created an economy based on integrated production, according to Stephen H. Gardner, director of McBride Center for International Business and Herman Brown Professor of Economics. Dr. Gardner said that adding more tariffs will interrupt trade, as well as production.
Canada is the second largest trading partner with the U.S., accounting for over 13 percent of imports into the country.
Trump has repeatedly tweeted negative statements about Canada, including claims that Canada has “taken advantage of our country for many years” and held “no political necessity” within NAFTA. Paz said Canada is likely to get involved with renegotiations because of Trump’s rhetoric.
Dr. Gardner said Trump’s treatment of Canada in NAFTA renegotiations holds significance beyond trade and affects its reputation “as a country that can be counted on” in other diplomatic situations.
“I hope that we can reach a reasonable agreement, and that it can continue to be a North American agreement, if not broader than that. Ideally, we would expand, instead of shrinking back into bilateral agreements with individual countries,” Gardner said.
Trump has expressed that he prefers bilateral trade agreements rather than multilateral ones, because they are “far more efficient, profitable and better” for U.S. workers. In bilateral agreements, the larger market more easily gains leverage over the smaller market.
Gardner said economists advise against bilateral agreements.
“It’s better to do things as broadly as possible, because from an economics perspective, it creates a broader playing field,” Gardner said.
Having one agreement with several countries rather than individualized ones helps standardize procedures and tariff rates across the board, according to Gardner. He also said multilateral deals help everyone follow the rules and boost the countries in the economy as a team, rather than in competition with each other.
Baylor has hosted numerous events in relation to NAFTA.
Gardner said he thinks “working toward peaceful, loving working relationships” is part of Baylor’s objective as a Christian institution, which reflects its support of free trade.
Former president, Harry Truman, spoke on Baylor’s campus in 1957 supporting free trade and a vision for the International Trade Organization, a concept that never came to fruition but inspired NAFTA.
Baylor held the first academic conference on the prospect for a free-trade agreement in 1989 called “Region North America: Canada, the United States, Mexico.”
In 2005, Baylor hosted former President George W. Bush, former Mexican President Vicente Fox and former Canadian Prime Minister Paul Martin for a summit to strengthen their trilateral relations.
From Nov. 5 to 6, the McBride Center for International Business will host a “Trade Integration in the Americas” conference, with people involved in the original NAFTA negotiations in attendance. Paz said he hopes the event will help bring awareness of the trade issues within the U.S., as well as connect students with future internship and employment opportunities.