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The Trump administration is in danger of making a ‘huge’ mistake in Nafta talks

  • The Trump administration's tough posture in North American Free Trade Agreement talks is dangerous for the US economy.
  • The idea that Mexico is "killing us on jobs and trade" is, to use the current administration's vernacular, "fake news."
  • The best way for the US to deliver on putting America first is actually to put North America first.
President Donald Trump speaks to members of the media before boarding Marine One on the South Lawn of the White House in Washington, D.C., U.S., on Monday, Dec. 4, 2017.
Andrew Harrer | Bloomberg | Getty Images
President Donald Trump speaks to members of the media before boarding Marine One on the South Lawn of the White House in Washington, D.C., U.S., on Monday, Dec. 4, 2017.

Five of seven planned rounds of negotiations for the North American Free Trade Agreement recently concluded in Mexico City, yet we remain far from a deal. As an investment banker and trade negotiator who has seen many deals crater because one party overplayed its hand, risk of a failed negotiation is real.

The toughest issues in a complicated negotiation are often saved for last. Still unresolved are the so-called "poison pills" that the administration has positioned as take-it-or-leave-it items. Those include the proposed sunset clause, which dissolves the agreement after five years if the three countries do not agree to continue it, and unrealistic demands that 50 percent of car parts come from the U.S.

The Trump administration's tough posture and its apparent willingness to pull out of Nafta is the result of its notion that our relationship with many of our trading partners, and Mexico in particular, is a net loss for American businesses and workers and a zero-sum game for our economy. Clips of President Trump claiming that Mexico is "killing us on jobs and trade" play on a loop on cable news and social media daily.

But to use the current administration's vernacular, this is "fake news." The reality is that when it comes to renegotiating Nafta, the best way for the administration to deliver on its promise of putting America first, is to put North America first.

Some 80 percent of economists surveyed by the Wall Street Journal predict that a Nafta withdrawal would depress U.S. growth and even possibly trigger a recession, while causing enormous and potentially irreparable damage to our integrated supply chains. Additionally, a North America first approach aligns with the incredible growth and demand predicted for the region over the next several decades. PwC's "The World in 2050" report estimates that North American GDP will practically double from $22.5 trillion to over $44 trillion in the next 33 years, with Mexico emerging as a top 7 global economy by 2050. Erecting barriers with neighboring markets makes little sense now, and it will make far less sense as Canadian and Mexican economic strength and consumer demand continue to grow.

"[F]ailing to successfully renegotiate Nafta would be a self-inflicted and deep wound and represent a 'huge' missed opportunity to make North America great."

Mexico and Canada are by far our two largest export markets, consuming nearly $600 billion in U.S. goods exported last year. Nafta led to the creation of the North American services market, which has produced U.S. trade surpluses year after year. Nearly 3 million American jobs are supported by U.S. exports to our North American partners.

Failing to put North America first would hurt U.S. manufacturing and agriculture. American farmers export $18 billion worth of agricultural goods to Mexico annually and even more to Canada, two of our three largest export markets. For our farmers, the ramifications of withdrawing from Nafta would be calamitous.

The loss of Nafta would harm auto companies like Ford and GM, tech companies like Cisco and Microsoft, and agriculture businesses like Archer Daniels Midland, as well as wheat growers and hog farmers, among others. Support for Nafta among U.S. businesses is broad and deep; I have never seen U.S. industry so unified on any policy issue.

Most importantly, a North America first approach would mean embracing the potential for a "North American century." It is easy to see that potential when you understand our shared strengths: a collective economy worth over $45 trillion by 2050; a globally competitive workforce where 22 percent are under the age of 30 compared to 16 percent in both China and Europe, according to the Council on Foreign Relations; a collective energy prowess that offers extremely competitive energy costs for manufacturing, and the relative geopolitical stability of having friendly border relations to work cooperatively on security, drug trafficking, and immigration.

North America has the opportunity to be the most formidable manufacturing platform in the world, the strongest regional economic bloc in the world, and an effective counter to China's rising strategic and economic influence. And our alliance would continue supporting American jobs while driving growth for American businesses. Indeed, contrary to popular rhetoric, a review of two decades worth of studies undertaken by the non-partisan Congressional Research Service found that Nafta's effect on net employment in the U.S. was negligible.

Make no mistake, Nafta, now 24 years old, needs to be modernized. Many of the principles our nations now share since Nafta became effective – securing a robust innovation economy, environmental stewardship and strong workforce protection – can be better reflected in an updated agreement. But failing to successfully renegotiate Nafta would be a self-inflicted and deep wound and represent a "huge" missed opportunity to make North America great.

Commentary by Stefan M. Selig, who served as President Obama's under secretary of Commerce for international trade at the U.S. Department of Commerce from 2014-2016. In 2017, he founded financial and strategic advisory firm BridgePark Advisors. Previously, Selig spent nearly 30 years in senior investment banking positions on Wall Street, including 15 years at Bank of America Merrill Lynch and most recently as executive vice chairman of global corporate & investment banking.

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