The North American Free Trade Agreement (NAFTA) was established in 1992 by President George H. W. Bush as a trilateral agreement between the United States, Mexico, and Canada. It was created as a way to reduce trading costs and help North America be more competitive in the global economy. Recently, President Trump has announced that he is going to attempt to renegotiate the agreement. He has mentioned that if they are not able to renegotiate, he is going to pull out of NAFTA altogether. The local economy in Wisconsin would experience several negative effects and very few positive effects if President Trump does decide to pull out of NAFTA completely.
Donald Trump has talked about many changes that he wants to make to the existing agreement, including the following:
· Lowering the trade deficit by eliminating unfair subsidies
· Asking for stronger protection for U.S. digital trade and intellectual properties.
· Ending the dispute resolution panel due to unfavorable U.S. rulings in the past
· Implementing a five-year sunset clause which would force signatories to recommit every five years
· Wants to update the rule of origins for car parts from 62.5% made in the U.S., Mexico and Canada to 85% made in those countries.
Businesses have expressed their dislike of the proposed sunset clause in particular. They dislike this proposed clause because it would cause uncertainty when investing. Also, President Trump has proposed the rule of origins change in order to bring auto manufacturing jobs back to the U.S. but this change could actually force companies to send jobs overseas for lower wage labor and just pass the cost increases on to the consumer. This would mean higher price tags for vehicles in the United States. These changes are being proposed with good intention, but it seems that the Trump administration has not fully considered the unintended consequences of the changes.
If the United States pulls out of NAFTA, there will be some severe consequences affecting business. Companies that operate in more than one country will have to completely move out of the foreign countries at their own expense. “That expense could well put them out of business. If...