Francisco Coll/Javier Palomarez
Javier Palomarez, former President & CEO of the USHCC and adviser to the White House, and Francisco Coll, Development Director of HAC L&M School de Nueva York and economic analyst for the World Economic Forum, among other experts, give their views on international trade as an engine of economic growth.
Francisco Coll: Protectionism is one of the most dangerous tools of economic policies and, if wrongly applied, it is one of the most harmful to the economy of the countries. In a globalized world, speaking of protectionism is speaking of putting barriers around progress and economic development.
In my opinion, globalization has made international trade to grow at a faster pace, directly affecting the world economy, which never was as favored as today. According to the IMF, growth estimates for the world economy remain at 3.9%, a really good pace of growth which would be conditioned upon the growth of international trade.
If we look at cases like China, the Asian country has become the leader in economic growth worldwide, as well as the most active country in terms of international trade, which is not a coincidence, but causality. Thanks to its great openness to international trade, China has become the engine of economic growth in the world.
“Both history and economics have taught us that countries with a high degree of openness to international trade also have the best levels of economic growth.”
The contribution of China to world economic growth is surprising, all this as a result of the strong commitment of Chinese Government to increase its presence in international markets, as well as to continue establishing relationships and trade agreements with the rest of the world. Thanks to this, we see a country with a strong growth and high expectations of growth in the coming years.
For that reason, protectionism, as I stated above, equals economic stagnation. Both history and economics have taught us that countries with a high degree of openness to international trade also have the best levels of economic growth.
Additionally, the benefits of this openness to the competitiveness of their industrial fabric make these companies lead in their areas globally.
Javier Palomarez, former President & CEO of the USHCC (United States Hispanic Chamber of Commerce), as well as the Spanish-American adviser to the White House, is with me to talk about this. Next, Javier will offer a more entrepreneurial approach, according to which, entrepreneurs must be the main promoters of free trade because they are also an interested party.
Javier Palomarez: The good news is that Donald Trump has neither torn up nor thrown out NAFTA altogether, as he famously promised during his campaign rallies. Instead, he appears to be taking a more measured approach to recalibrating and adjusting certain elements of the agreement.
I would propose that we move from the North American FREE Trade Agreement, to a redrawn North American FAIR Trade Agreement. A modernized version that keeps goods and capital flowing, but does right by our nations, our workers, our economies and our environment.
To get to a FAIR Trade Agreement, we need two things. First: Trump must temper his populist, protectionist views. Second: Business leaders need to band together and encourage him to do so.
This great tradition of demonstrative civic action is a vital, time-honored exercise of our freedom of expression. I believe that business and its leaders should remain a part of our collective push for positive change. Change that is certainly needed, now more than ever. Indeed, it is a time of great challenge and unrest in our country. But in times of great challenge, there’s also a great opportunity.
Right now, we have the opportunity to speak up and ensure this Administration has the benefit of a broader perspective, one grounded in the reality of our economy. A perspective that will allow us to weigh, without bias, the benefits and drawbacks of NAFTA.
And while we are evaluating it, we would do well to remember that since NAFTA was established, the whole of North America has emerged as a global powerhouse. Trade between America, Mexico and Canada has reached $1 trillion dollars annually. NAFTA has also allowed North America to emerge as an energy leader and lessened our dependence on middle-eastern sources of oil. Right now, North America is a thriving regional market with a combined GDP of over $20 trillion dollars. It is also important to remember that NAFTA has facilitated the creation of over 14 million American jobs.
And if you were to consider the trade that exists between the U.S. and Mexico alone, as we speak, there are over $525 billion dollars in bilateral trade between our two nations. In fact, America exports over $231 billion dollars of goods to Mexico, while we import over $294 billion dollars of goods from Mexico. That breaks down to over $1.5 billion dollars of goods crossing our un-walled border every business day. And over 6 million American jobs depend on this bi-lateral trade with our southern neighbor. Finally, if you were to consider this from a state-by-state basis, it may surprise you to know that Mexico ranks among the top 3 export markets for 31 of our American states. While NAFTA has some shortcomings, overall it has been overwhelmingly good for America!
But why would this matter to someone who advocates on behalf of American small business? The answer is simple. According to the U.S. Department of Commerce, over 95% of U.S. companies that do participate in foreign trade, are actually defined as small to medium-sized companies. A good portion of these companies consider trade in international markets as vital to their continued development. And why not, after all, 94% of the global marketplace exists outside of the United States. A better question might be, why should this matter to all of us? Again, the answer is simple. Small businesses are the very lifeblood of our economy and are responsible for creating almost 70% of all new jobs. The Administration should exercise great care, that in trying to protect our economy, they don’t harm American small business.
Francisco Coll: As Javier points out; ending an agreement that has contributed so much to the North American economy would be a complete mistake. As I said at the beginning, protectionism would only end the development of an economy that, though having a negative trade deficit, it is considered to be the world’s leading economic power.
For these reasons, when President Donald Trump appears before the media speaking of possibly closing the borders to imports, we can only see an irrational desire to eliminate one of the best and most effective engines of economic growth that a country can have.
Apparently, the president has resumed conversations with both Mexican and Canadian governments, in pursuit of establishing a new trade agreement between the countries. According to the latest news, there is already an agreement between those countries that, in the absence of action on Justin Trudeau’s part or the incorporation of Canada, will once again allow free trade between them.