Shrink the trade deficit? Try free trade
Last week, the U.S. Department of Commerce announced that the U.S. trade deficit in goods and services hit $291.2 billion in the first six months of 2018, putting the country on track to hit its highest annual deficit since 2008. Balancing trade deficits and renegotiating existing trade deals have been the impetus for the Trump Administration’s ongoing trade disputes with partner countries — the results of which have adversely hit farmers and families across the heartland. But it is free trade agreements, such as NAFTA, that have allowed the U.S. economy and agricultural industry to prosper.
The U.S. economy has run a trade deficit for years, which economists argue reflects that Americans consume more than they produce compared to the rest of the world. Further, U.S. agricultural trade actually helped the deficit fall to seven-month lows in April 2018 due to an increase in exports, particularly corn and soybean exports. That month, powered by a record $211.2 billion in exports, the trade deficit fell by about $1 billion. This record was powered in large part by soybean and corn exports, both increasing by around $300 million that month.
And look at how NAFTA has benefited the American economy and agricultural industry. U.S. agricultural exports to Mexico have quintupled since 1994, when NAFTA took effect. And in the last 10 years alone, American agriculture exports to Mexico have grown from $12.7 to $18.6 billion. Mexico is even the largest export market for U.S. pork, having purchased $1.5 billion worth in 2017. Put simply, trade works — and in these times of trade uncertainty, we should be working on expanding markets, not limiting them.
NAFTA, which should be preserved, but modernized, is a clear trade success story. NAFTA has allowed America’s food and agriculture industries to flourish, and these industries now support more than 43 million jobs across the country. NAFTA has also helped the U.S. to generate a $79 billion trade surplus in manufactured goods with Canada and Mexico from 2008 until 2014. If the Trump Administration’s focus remains on lowering the trade deficit, the best strategy is quickly concluding NAFTA negotiations and replicating the deal’s success in negotiations with other countries.