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NAFTA: What Does This New Round Of Negotiation Mean?


Now we're going to take a step back and take a look at the bigger picture. Carlos Gutierrez served as commerce secretary under President George W. Bush. Before that he was the CEO of Kellogg. He's now at the Albright Stonebridge Group, an advisory firm in Washington, D.C. Gutierrez has long been a champion of free trade and of NAFTA, and he joins us now in the studio to talk about the NAFTA changes under negotiation later this week. Secretary Gutierrez, thank you for joining us.

CARLOS GUTIERREZ: Thank you, a pleasure to be here. Thank you.

SMITH: So when Donald Trump was running for president, he talked about NAFTA a lot. Why was this 23-year-old trade deal at the forefront of a presidential election?

GUTIERREZ: Well, it was a combination of course of NAFTA and China. And the concept was that the reason we had people in unemployment, the reason we had had so many manufacturing jobs go overseas was because of trade and trade deals that were negotiated by previous administrations. And the examples were NAFTA and China, although it's interesting because we don't have a free trade agreement with China. But NAFTA was very much held up as why trade doesn't work, which really surprised...

SMITH: Like when jobs started going overseas.

GUTIERREZ: Because jobs started going overseas. That's correct.

SMITH: You've been a champion of NAFTA for years.


SMITH: But recently, you did say that you would like to see it updated.

GUTIERREZ: That's right.

SMITH: What changes would you like to see?

GUTIERREZ: The biggest, of course, is everything in the digital era that has come to be during NATA. So e-commerce, we need better e-commerce rules where you can have e-commerce sales from the U.S. to Mexico, from Mexico to the U.S., from Canada Mexico. And that's something that really needs to be structured in what is NAFTA. And that's missing. It's totally missing.

But I think everyone understands the idea of updating. It's when we talk about renegotiating and walking away if we don't get our way. That's - you can't walk away from a trillion-and-a-half-dollar market where over the last 25 years supply chains have been integrated, computer systems have integrated and just say, you know, turn off the light switch. It's just - it's not that easy.

SMITH: What would happen if the U.S. took a very hard line in the negotiations or walked away entirely?

GUTIERREZ: Well, it would hurt the U.S. to start with. There are a lot of products that are made in Mexico not necessarily 100 percent, say 60 percent of the value is done in the U.S. or even more. And then the - a small portion of the value is done in Mexico. But because of that, we're able to offer lower prices here in the U.S. So probably the first impact would be inflation because we'd start paying more for things that today are being imported at a lower cost.

So I think it would be bad for North America. And it would be bad for our economy. We often forget the lessons of our past. And last time we tried something like this in the 1920s, the Smoot-Hawley Tariff, with the same rationale, the same logic. It was a disaster because we stopped imports by increasing tariffs, but then everyone else did the same thing. So that hurt us and it was - that led into, interestingly the, Great Depression.

SMITH: Why do you think then that Trump's sort of hard-line talk against NAFTA resonated so much here?

GUTIERREZ: Yeah. You know, it's a good question. One of the things I go back to very often is our manufacturing as a percent of GDP. Our manufacturing output is pretty stable, pretty flat. If you go back 10, 15 years, it's between 12 and 14 percent. But our manufacturing workforce has been declining steadily. So we're producing the same output with fewer people. What that tells me is that technology is more of a threat to American jobs than trade.

And the national discussion should be, what are we going to do when we lose millions of jobs to things like robotics and artificial intelligence? That's the big problem coming at us, and we're not addressing that problem. We're addressing trade, which seems like we may be fixing the wrong problem. I worry about that we - we believe that the overriding goal should be to reduce our trade deficit. And, you know, I use the example of Germany. They have a surplus which is huge, an 8-percent-of-GDP surplus. But for the last 15 years, their economy has lagged ours. So the trade surplus or deficit is not a proxy for economic growth.

SMITH: What do you expect to see actually happen in the NAFTA renegotiation?

GUTIERREZ: I can't believe that we would actually walk away from NAFTA. I just don't think that it's to our nation's benefit. I don't think the business community would - I'm sure that they would speak up. So it's a matter of, how will these negotiations end? And if we can manage to come out with a product that is better, where all three sides have the opportunity to benefit, then I think that will be great. If we go into this saying, we have to win and therefore, they have to lose, or we take these benchmarks such as the deficit as our goal, then we can get ourselves in trouble. And maybe it's not getting rid of NAFTA. We could have a one-year period where we have some trade skirmishes that are just not good for our economy or anyone else's.

SMITH: Carlos Gutierrez was commerce secretary under President George W. Bush. He is now the chair of the Albright Stonebridge Group. Secretary Gutierrez, thanks for joining us.

GUTIERREZ: Thank you. Transcript provided by NPR, Copyright NPR.

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