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January 3, 2018

U.S. Trade Agreements: Reasons For Restraint

IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Republican-American

Staff Editorial

During the 2016 presidential campaign, Republican Donald Trump and his brain trust correctly concluded that railing against international trade agreements was good electoral politics. Mr. Trump targeted the North American Free Trade Agreement (NAFTA), which evolved during George H.W. Bush’s and Bill Clinton’s presidencies; and the Trans-Pacific Partnership, engineered during the George W. Bush and Barack Obama administrations. President Trump kept his promise to kill TPP last January, and is renegotiating NAFTA.

Many Americans, including Mr. Trump’s staunchest supporters, believe these trade deals were written in ways that did not put America first. This belief reflects a lack of trust in past administions, especially those of Messrs. Clinton and Obama, and is not materially different from the refusal of many Democrats to accept the possibility some of Mr. Trump’s policy ideas may have merit.

In reality, free trade is beneficial to all sides, and often benefits high-powered economies like America’s the most. “Buying and selling of goods and services across borders not only increased (in 2017), but also grew more than anticipated,” syndicated columnist Daniel Moss wrote for Tribune News Service late last month.

This prospect is all the brighter for the passage last month of historic tax reforms. Among the changes is a reduction in the corporate tax rate from 38 percent to 21 percent.

The law also contains provisions that will encourage corporations to bring large amounts of money back to the United States that previously was held offshore in response to oppressive taxes and other regulations.

Moreover, as Merrill Matthews of the Institute for Policy Innovation noted in a Jan. 2 Wall Street Journal op-ed column, NAFTA participants Canada, Mexico and the United States are codependent on energy and benefit from the trade agreement’s tariff terms. “Canada and Mexico need the United States to buy their excess crude oil, and the United States needs its neighbors to cover its own shortfall,” Mr. Matthews wrote. “Canada depends heavily on U.S. refineries, especially in the Midwest and on the Gulf Coast, which specialize in processing Canada’s heavy crude. Mexico also depends on the United States to refine its crude, which Mexico buys back as gasoline and diesel.”

Mr. Trump and congressional Republicans therefore should demonstrate restraint in their rhetoric concerning trade, lest they short-circuit their own blueprint for reviving U.S. industries and other businesses that reach across America’s borders in delivering products and services.


 

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