This is interesting because a large part of our trade deficit is made up from autos, and auto parts. While at the same time, we are growing our auto imports from SE Asian countries.
Without import tariffs, LDCs like this would become much more competitive with their lower wages. (This is as long as shipping costs plus production costs are less or equal as well) So if trade does what it does best, consumers would have lower prices.
What do you guys think would happen if we directed these trade agreements away from North America?
Do you think we would get more or less trade benefits?
https://www.cnbc.com/2017/09/22/commerce-sec-wilbur-ross-says-scariest-part-of-nafta-is-autos-auto-parts-make-up-nearly-all-of-the-trade-deficit.html
In theory it would allow for more competition in the marketplace, which as you said, would lower prices for consumers. American made cars from the article seem to be quite popular with our neighbors, with the getting rid of NAFTA it could lead to the rise of Toyota, Subara, etc.. in those respective countries. At the same time it could also cripple American car manufacturers even more and take jobs away from the US as the demand for those parts decrease. There's a trade off here and I think American companies would be pretty interested in keeping NAFTA the way it is.
ReplyDeleteI think the answer is that it would depend. We may get more trade benefits if we make trade agreements with countries that export more goods we need more cheaply than we can make them in the US. But one of the benefits of NAFTA is that transport costs are lower with Mexico and Canada trade. These countries are our neighbors so the cost of shipping goods back and forth is lower than it would be for the US and, say, China. So that is also a cost that should be taken into account. And even more important than the trade benefits we get from NAFTA are the benefits from people in mexico coming here to work. This is a controversial topic but it does keep our prices lower for more people in the US where we have more workers from Mexico competing with local workers in the US for jobs. We have an aging population here and Mexico has more of the younger workers that we need in the US.
ReplyDeleteI aslo question how much of a benefit we would get with non-treaty nations if we leave NAFTA. NAFTA is not a customs union so we do not have a universal approach to tariffs with non-treaty countries. All member countries are free to trade with whatever outside countries they wish under the present agreement.
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