Hi Dani,



I think that experience is the best teacher, and while it's a bit of a reach, the last big international trade agreement (NAFTA) can serve us well to foresee how the TPP agreement might play out.



i) NAFTA was (originally) an agreement between three countries on the same continent.

ii) NAFTA was signed and ratified decades ago.

iii) Canada, the U.S. and Mexico already had longstanding trade links, moreso than the TPP nations.



But those factors aren't enough to disqualify it from being used as a basis for discussion, IMHO.



We see very clearly the results of the NAFTA agreement and most of them are positive. Yes, there are things to crank about, and here is a partial list;



a) Of the three NAFTA nations, the largest share of jobs picked up and left the U.S. for Mexico, with its lower wage/lower labour standards/lower environmental standards.



Even with longer transportation routes and international borders to cross, the savings were so apparent that millions of U.S. jobs relocated to Mexico.



b) The second-largest share of jobs lost were from Canada (and you guessed it) they all went to Mexico, almost none went to the U.S. which has similar wage/labour standards/environmental standards to Canada. (In fact, many Canadian labour and environmental regulations are photocopied American legislation, with the word 'Canada' inserted in the appropriate points)



c) Consequent to a) and b), both in the U.S. and Canada unemployment increased in the aftermath of NAFTA ratification.



Unemployment remains higher in both countries, when compared to years previous to NAFTA.



d) Mexico won the NAFTA lotto. Everybody knows it.



e) Some corporate headquarters in Canada, moved, not to Mexico, but to the U.S.A.



f) Not only did unemployment increase in the U.S. and Canada, but many factories shuttered, and some towns or cities shut down or are ghosts of their previous glory. Check Flint, Saginaw, Pontiac, Detroit, Windsor and many more.



When those manufacturing jobs left the country, the tax base was damaged and with no industry to attract new taxpaying residents, these places dwindled and continue to dwindle.



g) Concomitant with NAFTA were new U.S. tax rules for individuals and once added together, are responsible for the rise of the 1% class in North America.



Prior to NAFTA and prior to former President Reagan's tax changes (although President Reagan did act appropriately at the time, but they should have been rolled back by the year 2000) there was no 1% class in North America. That term was unknown.



h) Capital flight from all three countries. Huge amounts of capital left Canada and the U.S. to build factories in Mexico. While profits from Mexican assembly plants eventually left Mexico to end up in the U.S. -- where those profits sat for years, doing nothing productive for the U.S. economy -- that excess capital eventually wound up in Asia, stimulating the Asian nation economies instead of the North American economy.



i) A cultural, business, and demographic homogenization between the three countries occurred in the NAFTA years. Industry standards are more uniform across the continent for one example. For another, there are now more people from the three countries living outside of their own country and in one of the other two NAFTA countries. Does this contribute to North American solidarity or understanding between the NAFTA nations? It would be a great thing if that was an unintended consequence.



j) The whole point of NAFTA was missed by the politicians of the day, and by many since;



It was an agreement designed to make the three countries of North America more competitive, vis-à-vis the rest of the world. Not to help them to eat each other.



But instead of continuing and overseeing that grand and overriding vision, mediocre minds took the conversation and turned it into a 'Canada vs. the U.S.' conversation, and a 'U.S. vs. Mexico' conversation, and a 'Mexico vs. the United (imperialist tendency) States and Canada' (the neo-colonial power) trying to exert its will on Mexico.



The exact opposite of what NAFTA was designed to accomplish!



NAFTA was supposed to help 'our bloc' to become more competitive against the other (rising) blocs.



In that, it has failed because the people charged with implementing it fell into parochial politics, instead of embracing the concept of 'our North American bloc' vs. 'their bloc'.



k) Multi-billions, perhaps trillions of investment dollars left North America for China and other Asian nations.



Sure, those corporations (that heavily invest in Asia) have their headquarters in the U.S. and eventually some amount of profit returns to the U.S. (but almost never to Canada or Mexico) where it sits in the bank doing nothing much productive for the North American economy.



l) Due to a lowered tax base due to downward pressure on wages, due to unemployment, and due to capital flight, the quality of infrastructure in the U.S. and Canada are at historically poor levels, with fewer (if any) new infrastructure projects planned.



m) The case can be made that higher interest rates, GDP growth, P/E ratios, government debt and deficits, and the need for QE are all the result of a poorly managed NAFTA agreement. (The bus was driving itself)



Not only that, but crime (the social aspect of higher historic unemployment) and downward pressure on wages, the Occupy Wall Street movement, and other social negatives occurred as a result of a somewhat bungled NAFTA agreement.

_____

Even with all of that, I think NAFTA (narrowly) succeeds more than it failed. (But it could have been so much more!)



Productivity, profits for U.S. corporations, (and to a much smaller extent) profits for Canadian companies, a greater range of products and cheaper products for consumers, are all positives that flowed from NAFTA.



The rise of consumerism in North America was facilitated, in part, by NAFTA.



The 1% certainly has no problem with NAFTA.



And finally, our relationship with Mexico improved to historically positive levels (we must remember that Mexico had been courting the Soviet Union prior to NAFTA) and some political, cultural, economic and social homogenization between the three countries has occurred.



We were never going to be at war with Mexico -- but they are now and permanently our partner -- and that's a big change when viewed from the early 1980's perspective.



SUMMARY:



The ball was dropped early in the game; Leaders got tunnel vision instead of focusing on NAFTA as a vehicle to make North America stronger compared to rising competitor blocs; NAFTA still represents a nominal victory in principle, for international trade agreements.



And the Number One takeaway from the NAFTA experience?



NAFTA could have been so much more with the right supervision.



And that's exactly why I'm worried about TPP and TTIP.



TPP will run away with itself. Ultimately, no one person or organization is in charge of it. It will become a power dedicated to feeding itself, for itself, with no accountability, no checks and balances and no levers to rein it in -- if our experience with NAFTA is anything to go by.



Thank you for the fascinating essay Dani, and I apologize for the long comment.



As always, very best regards, JBS