What Is Behind the Renegotiation of NAFTA? Trumpism and the New Global
Economy
Monday, July 24, 2017
By William I. Robinson, Truthout | News Analysis
President Donald Trump leaves the stage following a rally on June 21, 2017
in Cedar Rapids, Iowa. (Photo: Scott Olson / Getty Images)
The Trump administration's decision to renegotiate with Mexico the North
American Free Trade Agreement (NAFTA) has been interpreted by most observers
as the opening salvos of a new wave of US protectionism. But Trump's public
discourse should not be confused with the essence of his government's
economic program and likely trade policies. A better explanation for the
renegotiation, which may begin as early as mid-August, is to be sought in
the transformation of the US and the global economy in the years since NAFTA
went into effect in 1994.
The North American economic region is part of a globally integrated
production and financial system. Even if they were so motivated, US
political and economic elites could not, without utterly disrupting and
destabilizing the country, disentangle the United States (or the North
American region) from the vast network of chains of subcontracting and
outsourcing that characterize the global economy. Trump and his billionaire
cabinet members are part of the transnational capitalist class. The Trump
family's business empire spans the globe, including factories in Mexico that
take advantage of cheap labor and export back to the United States, thanks
to the provisions of NAFTA.
Trump railed against NAFTA during his electoral campaign as part of his
strategy of garnering a base of support among sectors of the US working
class who face heightened insecurity and downward mobility as a result of
capitalist globalization. No viable candidate can hope to be elected without
putting forward a populist message. Hillary Clinton was forced as well
during the campaign to come out against the Trans-Pacific Partnership (TPP)
that Trump jettisoned upon taking office, just as Obama lashed out against
globalization and its devastating effects on working people when he first
ran for the presidency.
But beyond public discourse, there is nothing populist in the policies that
the Trump government has so far put forth. Trumponomics involves
deregulation, slashing social spending, dismantling of what remains of the
welfare state, privatization, tax breaks to corporations and the rich, and
an expansion of state subsidies to capital -- in short, neoliberalism on
steroids. The US political elite are deeply divided and mired by infighting,
but businessmen and investors are, for the most part, elated with Trump's
neoliberal program, as indicated in the steep rise of stock prices in the
months following his election.
From the Industrial to the Digital Economy
When NAFTA was negotiated in the early 1990s, the largest US-based companies
were automotive, appliances and machine tools, and manufacturing still drove
the US economy. At the time that NAFTA went into effect in 1994, the World
Trade Organization (WTO) did not even exist, few people used the internet,
and although computers were just coming into widespread use, there was as
yet no such thing as a digital economy. The principal objective of free
trade negotiations at the time was to facilitate the establishment of a
globalized system of production by lifting restrictions that national
governments had placed on the cross-border movement of goods. This was
achieved by NAFTA, along with the creation of the World Trade Organization
in 1995. An astonishing 400 trade agreements were negotiated around the
world from 1995 to 2016.
But since NAFTA and the WTO went into effect, the global economy has
continued to experience development and transformation. In particular, the
transnationalization of services and the rise of the so-called digital/data
economy -- including communications, informatics, digital and platform
technology, e-commerce, financial services, professional and technical work,
and a host of other intangible products, such as film and music, that
require intellectual property protections -- have moved to the center of the
global capitalist agenda. In fact, worldwide growth of trade in services has
outstripped by far that of goods in the last quarter century. By 2017,
services accounted for some 70 percent of the total gross world product.
On the one hand, the United States has led the way in the development of the
digital economy, and services account now for most growth in exports. The
United States registered a deficit of $750 billion in 2016 in trade in goods
with the rest of the world, but it ran a $250 billion surplus in services
that same year. In 2016, the United States ran a $64 billion deficit with
Mexico in trade in goods, yet according to the office of the United States
Trade Representative, it ran a nearly $7 billion services trade surplus that
year. On the other hand, Mexico is rapidly transitioning into the digital
economy. Mexican IT services surpassed $20 billion in 2016 and are expected
to increase 15 percent year on year. High-tech Mexican entrepreneurs now
boast of the rise of silicon valleys in Mexico City and Guadalajara, the
country's two largest cities.
NAFTA did not include provisions related to this digital trade. In addition,
it did not include state-owned enterprises and the Mexican energy sector,
nor did it oblige Mexico to revise its labor code or abandon a number of
regulatory practices. Although the Mexican government of President Enrique
Peña Nieto has, for the first time since the country nationalized oil in
1938, allowed foreign energy companies to participate in exploration and
production, the energy sector still remains (for the most part) national and
owned by the state. And successive neoliberal governments in Mexico have
made limited headway in their efforts to revise the labor code and lift
regulations on the hiring and firing of workers in order to make labor more
easily exploitable.
US trade representative Robert Lighthizer, who will represent the United
States in the NAFTA renegotiation, was explicit in declaring that the
purpose of the renegotiation is to "modernize" and "update" the agreement.
"NAFTA was negotiated 25 years ago," he said, "and while our economy and
businesses have changed considerably over that period, NAFTA has not." In
particular, he said "digital trade" had barely begun when the agreement took
effect. New provisions were needed to address this digital trade, as well as
intellectual property rights, regulatory practices, state-owned enterprises
and labor regulations. Far from protectionism, by renegotiating NAFTA and
other aspects of the global trade regime, the United States is acting to
break down national barriers to service and digital trade that is now at the
cutting-edge of the global economy; that is, it is promoting the next
generation of globalization.
Why the Nationalist, Populist and Protectionist Rhetoric?
Attempting to explain trade, economics and international relations from an
outdated nation-state framework of analysis does more to obscure than to
elucidate the dynamics of the new global capitalism. While it is true that,
putting aside trade in services, the United States has an enormous trade
deficit with Mexico (as well as with China and many other countries), the
fact is that exports that go from Mexican to US territory are not "Mexican"
exports. They are the exports by hundreds of transnational corporations from
the United States and from all over the world, that operate in Mexican
territory and that move their products through the vast networks of the
global economy. The imports of goods into the United States from Mexico are
transnational corporate exports moving from one national territory to
another. National trade statistics conceal the transnational essence of the
new global economy, and with it, the transnational class relations behind
much contemporary international political dynamics.
So why has Trump railed out against Mexico through a discourse that is
nationalist, populist and protectionist, not to mention deeply racist? To
answer this, we need to identify a fundamental contradiction in global
capitalism: Economic globalization takes place within a system of political
authority based in the nation-state. This contradiction generates a host of
dilemmas for states and the transnational elite. Governments gain some of
their legitimacy by achieving growth, generating employment and prosperity.
Yet, in the age of capitalist globalization, governments are dependent on
attracting transnational corporate investment to the national territory,
which requires providing capital with all the incentives associated with
neoliberalism -- downward pressure on wages, deregulation, austerity, and on
so -- that aggravate inequality, impoverishment and insecurity for the
working classes.
To say this in academic terms, nation-states face a contradiction between
the need to promote transnational capital accumulation in their territories
and the need to achieve political legitimacy. Governments around the world
have been experiencing spiraling crises of legitimacy in the face of the
unprecedented inequalities and hardships imposed on the working classes by
globalization. This situation generates bewildering and seemingly
contradictory politics.
Trumpism is a far-right response to the crisis of legitimacy that rests on a
populist and nationalist message aimed in particular at those sectors of the
US working class that face increasingly precarious work and social
conditions. Trump's imperial bravado and racist discourse, in part
predicated on whipping up anti-Mexican and anti-immigrant sentiment, is an
appeal to these sectors to channel their fear and insecurity towards a
racist consciousness of their condition.
At the same time, therefore, Trump's Mexico agenda cannot be separated from
its escalation of the war against immigrants, particularly from Mexico and
Central America, inside the United States. The criminalization of
immigrants, a sharp increase in raids and detentions and "build the wall"
rhetoric are part of a larger strategy to disarticulate the political
organization and resistance that has taken place among immigrant communities
in recent years. It is not surprising that the recent wave of detentions and
deportation of immigrants from Mexico and Central America have targeted
labor and community activists among the undocumented immigrant community.
The US economy and the transnational capitalist class depend on the
exploitation of an immigrant workforce that is held in labor peonage due to
its lack of citizenship rights.
But the US economy and the transnational capitalist class depend on the
exploitation of an immigrant workforce that is held in labor peonage due to
its lack of citizenship rights. US rulers have been exploring ways to
replace the current system of super-exploitation of undocumented immigrant
labor with a mass "guest worker program" that would be more efficient in
combining super-exploitation with super control. Indeed, while the detention
and deportation of undocumented immigrant workers in California has
escalated in recent years, the use of "guest workers" in that state's $47
billion agricultural industry increased by 500 percent from 2011 to 2017.
All of this is not to say that Trump's populist, nationalist and
protectionist discourse should be taken lightly. This discourse is tinged
with a vicious racism, has inspired a neo-fascist mobilization of extreme
right groups in US civil society and has escalated international tensions.
But we would do better to see Trumpism as a highly contradictory and
unstable far-right response to the crisis of global capitalism than a
trenchant policy of protectionism and populism.
With everything going on in the White House, the media must maintain
relentless pressure on the Trump administration. Can you support Truthout in
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Copyright, Truthout. May not be reprinted without permission.
William I. Robinson
William I. Robinson is professor of sociology, global studies and Latin
American studies at the University of California at Santa Barbara. His most
recent book is Global Capitalism and the Crisis of Humanity.
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