Three Reasons Why a New NAFTA Should Not Last Forever

Crony capitalists and globalists want a flawed trade agreement immune from updates, sensible revisions

by Michael Stumo | Updated 19 Sep 2017 at 8:01 AM

Way back in the last century, specifically the year 1993, the U.S. was the uncontested post-Cold War superpower. Mexico was prospering. China was a poor country. West Germany was digesting East Germany.

Mobile phones were for the rich, were big, and were not “smart.” Amazon and Google did not exist. Steve Jobs was CEO of Next. Apple, led by someone not named Steve Jobs, released the Newton. The Dallas Cowboys won their third Super Bowl. Whitney Houston boasted the most popular song of the year, “I Will Always Love You.”

There was also a major 1993 debate about the first big, modern trade agreement called the North American Free Trade Agreement (NAFTA). Promises were made about job creation, economic growth, a win-win agreement. NAFTA passed.

The next year Mexico crashed. Presidential candidate Luis Donaldo Colosio was assassinated on videotape. Maya Indian rebels marched out of the forest declaring NAFTA a death sentence for Mexico's Indians, setting off the most serious guerrilla uprising in a generation. Subcomandante Marcos wrote a love letter to newly elected president Ernesto Zedillo Ponce de León stating, "Welcome to the nightmare." Mexico devalued the peso, causing an economic crisis. Mexico has never recovered.

The Trump administration is reportedly considering a proposal that any new North American Free Trade Agreement (NAFTA) be temporary, rather than permanent. Crony capitalists and globalists are ramping up their opposition, claiming the need for "business certainty" as they continue offshoring our economy and jobs.

Permanent trade agreements are a dumb idea. Here are three reasons why limiting NAFTA and any other trade agreement to a five- or 10-year term is, in contrast, a good idea.

First, government officials would be forced to periodically evaluate whether trade deals are working before pursuing any renewal.

Unfortunately, trade agreements generally are not evaluated for success. The 2015 Trade Promotion Authority (TPA) bill —often referred to as "Fast Track" — required the U.S. International Trade Commission (ITC) to review all past trade agreements. The ITC did so, though nobody cared about the result — which was a mixed bag of conclusions by technocrats.

A sunsetting and renewal process would require decision-makers to pay attention. And Congress should have to debate a trade deal renewal. They would have to debate whether the agreement is working before deciding to renew, amend or terminate. Globalists would have to demonstrate that the promised benefits were achieved. The burden of proof would be on those who want to renew.

Second, U.S. law says business contracts cannot be permanent, so why should trade deals be any different? Businesses deal with the so-called "uncertainty" of temporary business contracts as a basic part of their existence. Judges will not enforce business contracts that are permanent because that is "against public policy." The Illinois Supreme Court once stated, when refusing to enforce a permanent business contract:

"Forever" is a long time, and few commercial concerns remain viable for even a decade. Advances in technology, changes in consumer taste, and competition mean that once profitable businesses perish — regularly. Today's fashion will tomorrow or the next day inevitably fall the way of the buggy whip, the eight-track tape and the leisure suit. Men and women of commerce know this intuitively and achieve the flexibility needed to respond to market demands by entering into agreements terminable at will.

Which leads to a third reason to support sunsetting for a new NAFTA. Trade negotiators are not omniscient. Even if negotiators brilliantly consider all options, deftly navigate the thicket of competition interests, and craft a true "win-win" deal, the world will still change and evolve. New technologies and new economic problems can make last year's perfect deal look like a missed opportunity.

Commerce Secretary Wilbur Ross said that NAFTA is "at best an obsolete agreement." And House Ways and Means Chairman Kevin Brady (R-Texas) and Trade Subcommittee Chairman Dave Reichert (R-Wash.) said NAFTA should be modernized to include digital commerce.

Things change. So should trade agreements. Sunsetting them every five or 10 years is a good policy that will force elected officials and technocrats to do their job in the full service of the national interest.

Forever is a long time.

Michael Stumo is the CEO of the Coalition for a Prosperous America.

  1. economy
  2. free-trade
  3. jobs
  4. mexico
  5. nafta
  6. trade
  7. united-states
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