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Trump and NAFTA: Populism or Corporatism?

I am of the opinion that had it not been for his positions on trade, Donald Trump would not be President. By using rhetoric that strongly denounced free trade agreements cooked up by “elites” as the cause of all ills for working Americans, Trump was able to be branded as a “populist”. This language allowed him to win over industrial workers and sweep the rust belt.

The debate over trade policy (specifically trade deals like NAFTA and TPP) is, to say the least, strange. Of all of the issues that have failed to fall along party lines, free trade is perhaps the most significant due to its large impact on the US economy and blue-collar workers. Neither of the two major parties have established themselves as taking a hardline stance for or against trade (they’re both, by and large, supporters), which allowed for the two “populists” of the 2016 campaign, Trump and Bernie Sanders, to have strikingly similar stances on the issue. The discussion doesn’t revolve around the ideals embodied by the Republicans or Democrats, but rather a dualist view of the economy that pits the American worker (the victim of free trade) against wealthy elites who manufacture trade deals for their own benefit.

For quite some time, harsh criticism of NAFTA was largely taken up by progressives and leftists, making Trump’s position even more bizarre to those familiar with the debate. Ralph Nader’s Public Citizen writes that promises made by proponents of NAFTA “have failed to materialize…millions have suffered job loss, wage stagnation, and economic instability…”. The AFl-CIO takes a similar tone, noting that NAFTA promised the creation of “hundreds of thousands of U.S. jobs. Unfortunately for American working families, the opposite has occurred”. The liberal Economic Policy Institute calls NAFTA “a disaster”. Much of this could have appeared in a Trump campaign speech without anyone noticing much of a deviation from the norm.

Progressives are now in an awkward position. The unintelligent and xenophobic Republican President is relying on talking points that leftists have been trying for years, unsuccessfully, to put in the mouths of establishment Democrats. While it’s true that progressives and Trump supporters (blue-collar workers in particular) share at least one thing in common, it would be foolish for those on the left to let their guard down when they hear Trump call NAFTA “the worst trade deal ever signed”, or see him express a strong desire to re-negotiate the deal with Mexican president Pena Nieto. The current role of the left regarding trade is to ensure that Trump’s renegotiation fulfills his promise to American workers that jobs and wages will stop taking hits for the sake of American business interests.

Many of the gripes that progressives have with deals like NAFTA are in regards to their demolition of regulations that govern food, water, the environment, public services, and the financial sector. Economist Joseph Stiglitz writes “Environmental, health and safety regulations have been attacked and put into jeopardy” because of NAFTA. Trump and the GOP controlled congress won’t attack NAFTA on these grounds, for obvious reasons, and this is what progressives should most be concerned about.

However, it’s also important to note how Trump can potentially improve the deal. His charge against NAFTA has been largely based on the idea that American workers have lost jobs to companies who set up shop in Mexico. This has undoubtedly been the case for a number of American laborers. While Trump’s plan to combat such job loss has been based on the misguided idea that tariffs will incentivize companies to rethink leaving the US, he could create the same effect by doing away with the controversial investor-state dispute settlements (ISDS) that have become an integral part of NAFTA, TPP, and other proposed trade deals.

These dispute settlements allow private companies to sue national governments for damages or “lost profits” if their plans for moving to Mexico don’t go as planned due to regulation, government seizures, are any restriction on moneymaking. This radically reduces the risk typically associated with a company moving to a foreign nation. When companies know they can sue for any money lost on a large foreign investment, they have little reason to hesitate in their decision to take business out of America, where profits aren’t federally insured. Jarden Bernstein and Lori Wallach of Public Citizen write:

The ISDS regime and the broad, vague investor rights it enforces must be recognized as a massive risk shift from powerful, deep-pocketed corporate interests onto the rest of us. There is no way it could withstand a balanced cost/benefit analysis. The simple solution is for multinational firms to stop externalizing the costs of these risks and finally internalize them.

Companies have taken advantage of this; suits claiming over $13 billion dollars have been filed in ISDS courts. Stiglitz rightly states: “Meanwhile, those harmed by the actions of the foreign firms…do not have comparable protections of appealing to an international tribunal and receiving compensation.” Economist Dean Baker writes:

A major part of NAFTA was the investment chapter that puts in place safeguards to ensure U.S. companies that Mexico’s government will not confiscate their factories or restrict their ability to take profits out of the country.

This made it easier for companies like General Motors to set up assembly plants in Mexico and ship the finished cars back to the United States. This was good news for General Motors’ efforts to boost profits. It was not good news to the autoworkers in the United States who lost jobs or were threatened with job loss if they did not accept pay cuts and other concessions.

If Trump wanted to declare victory over NAFTA, he would do away with investor-state dispute settlements. Such a blatant act of unnecessary, international corporate welfare fits into his populist message quite well, and would net the largest benefit for working people in the US. Trump said in a speech last year that NAFTA-esque globalization “has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.” Through the lens of ISDS, he’s absolutely right.

But where Trump goes from here can’t be seen yet. Renegotiating NAFTA, something that Stiglitz said “could make significant progress”, is a good sign. But Trump’s cabinet, the richest in US history, likely won’t welcome the idea of anything that strips corporations of their international influence. Will Trump’s populist tendencies be a more powerful force than the opinions of the billionaires he’s chosen to surround himself with?

Nobody wants to stop free trade. Noam Chomsky, an ardent critic of NAFTA and TPP, wrote “No sane person is opposed to globalization, that is, international integration. Surely not the left and the workers movements, which were founded on the principle of international solidarity—that is, globalization in a form that attends to the rights of people, not private power systems.” It’s important that progressives keep a wary eye on Trump’s trade positions and whether they remain consistent with his populist trade promises. If Trump allows for regulation to continue to be dismantled as it has under NAFTA, the US will continue to bear an economic burden for the sake of enriching a select few. But by removing investor-state agreements, which enrich those same few in a more broad and dangerous way, Trump can take steps to ensure that globalization works for everyone who participates, workers in particular.

Photo: Jim Winstead/Creative Commons


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Patrick Carr

Patrick Carr is a freelance writer and researcher who specializes in economics, current events, international relations, and environment issues. He has worked as a staff member on a number of independent publications, and his work has appeared on DailyKos and Counterpunch.