Reforming North American Trade

President Trump mentioned that he “may not renew” the United States-Mexico-Canada Agreement (USMCA), the replacement of the North American Free Trade Agreement (NAFTA) that he signed during his first term. 

This remark naturally concerned people who have built their businesses on NAFTA commerce, but there are so many misunderstandings about the NAFTA/USMCA program that evaluating both its current status and its future requires some background.

NAFTA dates to the late 1980s and early 1990s, when we still believed in the dream of free trade -- the idea that if we lowered our trade barriers, our trading partners would too (Newsflash: They didn’t). 

At that time, we were watching “developing nations” on the Pacific Rim take over manufacturing from western nations at a surprising pace. Western nations were looking for a way to keep manufacturing at home, so the idea of the Free Trade Agreement (FTA) -- a treaty that rewards predominantly domestic manufacture and sourcing with reciprocal duty-free treatment -- was born to serve this goal.