Raising tariffs on imports will damage not only the U.S. economy but also international relations, and abandoning NAFTA could have unanticipated consequences in America’s war on drugs, according to experts who spoke Wednesday at the 2018 North County Economic Summit.
International trade, the impact of tariffs and policies that jeopardize America’s relationship with nations considered our “friends,” particularly Mexico, were among the topics tackled at the event in the two-hour summit presented by the UCSB Economic Forecast Project at The Radisson in Santa Maria.
The basics of tariffs and their impacts were discussed by Peter Rupert, executive director of the Economic Forecast Project.
NAFTA and America’s relationship with Mexico were the focus for Roberto Rodriguez Hernandez, Mexican consul for the Tri-Counties Region, and Jorge Castaneda, the former foreign minister of Mexico.
All three indicated the promises, actions and policies of President Donald Trump are economic threats.
Megan McArdle, a columnist for the Washington Post, and Amity Shlaes, a best-selling author who writes about politics and economics from a libertarian point of view, took a look at why Americans have embraced protectionism, the impacts of that attitude and how presidents and federal policy have led to an erosion of trust.
Rupert dispelled what he said are myths about tariffs. One is that they save jobs.
“Almost every economist in the world will say tariffs won’t save jobs,” he said, adding they will cause other workers to lose their jobs. “They will save some, but at what cost?”
Rupert said another myth is that exports are good, but imports are bad — a philosophy that leads to placing tariffs on imports as a way of controlling that ratio and increasing U.S. consumer spending on goods made here.
But he said if nations focus on what they do best, they will produce those goods at a lower cost than nations that can’t. Other nations will buy those goods while selling the products they are best at creating.
Thus, through trade, consumers in various countries get the goods they want at lower prices.
However, tariffs placed on imports are “hidden” costs that result in U.S. consumers paying higher prices for some commodities.
“Which means we’re paying more for it than anyplace else in the world because there’s a tariff on it,” Rupert said. “Here’s an idea: zero tariffs, and fire all the people” who are setting them.
Rupert was critical of the tariffs Trump has proposed on products from certain countries, which will prompt those countries to retaliate by placing tariffs on U.S. products.
“A tariff war would be devastating to our economy,” he said.
Economics of trade
Rupert’s philosophy was echoed by Hernandez.
“A trade war is nonsense because nobody is going to win,” Hernandez said, pointing out that 95.7 percent of consumers live outside the United States.
He also said the United States should not abandon the North American Free Trade Agreement that has benefited Mexico and Canada as well as the U.S. in jobs, revenues and investments.
Hernandez said Mexico is the second-largest export market for U.S. goods, and trade between the United States and Mexico is now $525 billion a year, three times what it was before NAFTA.
Trade between California and Mexico totals $73.1 billion a year, he said, adding that 16 percent of California’s products go to Mexico, which provides 500,000 jobs statewide, Hernandez said.
He also claimed Santa Barbara, San Luis Obispo and Ventura counties’ revenue from exports to Mexico totals $1.367 billion, which provides 1,800 jobs in the Tri-Counties area.
“We need each other, obviously, and the reason is very clear,” Hernandez said. “Let’s stop fighting and start negotiating on good terms. We need good negotiations."
More than money
Castaneda said it’s important to look at trade in the broader context of U.S./Mexico relations, explaining that Mexico has always been considered a “friend” of the United States.
Some of the issues of contention between the two countries are immigrant children coming through Mexico from Central America, security and intelligence since 9/11 and marijuana smuggling.
“Mexico doesn’t have a marijuana problem,” Castaneda said, adding Mexicans really don’t smoke marijuana, consuming far less per capita than other nations.
But he said the United States has been forcing Mexico to halt the movement of marijuana across the border by burning farmers’ crops, intercepting shipments headed toward the border and conducting border checks, resulting in shootouts with drug runners.
He indicated halting marijuana shipments should be handled by the United States, not Mexico.
“Can anyone give me one good reason Mexico should be doing this?” Castaneda said. “I can’t think of one — except this is maybe what friends do.
“This is not what we want to do,” he added. “We’ll not do it because it benefits us — it’s the stupidest thing we could be doing. But we do it because we’re friends.”
Castaneda said Mexico has also increased border security at the demand of the U.S. government.
“There has not been one (suspected terrorist) coming into the U.S. from Mexico since 9/11,” he said.
He also said U.S. deportations of Central American children have decreased because the young immigrants are being intercepted in Mexico, where the deportations have increased.
“Why in the world should we be doing all these things for a man who wants to rip up everything (Rupert and Hernandez) have been talking about?” Castaneda said, adding all those things will have to be on the table “as a package” in NAFTA negotiations.
“If the U.S. wants Mexican cooperation to continue as it has, the U.S. has to be more flexible on NAFTA negotiations,” Castaneda said. “If not, there are going to be serious problems in relations.”