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<\/a><\/p>\nThe Wall Street Journal
\nCopyright (c) 1992, Dow Jones & Co., Inc.
\nFriday, July 31, 1992
\nNAFTA’s Protectionist Bent
\nBy James Bovard<\/p>\n
Pandering to protectionists is poisoning the North American Free
\nTrade Agreement. In its attempt to get a so-called free trade pact
\napproved, not only is the Bush administration surrendering to
\nCongress’s demands, but it may be setting a precedent for higher
\nU.S. trade barriers against scores of other countries. It calls to
\nmind the Carter administration’s surrender to Soviet demands in the
\nSALT II talks.<\/p>\n
The key protectionist danger in NAFTA lies in its new rules of
\norigin. Rules of origin are the federal regulations that determine
\nthe national origin of an imported good. For most imports, national
\norigin is determined by the country in which the product was last
\nsubstantially transformed into a “new and different article of
\ncommerce.”<\/p>\n
NAFTA will have more protectionist rules of origin for autos,
\ntelevisions, and especially clothing. In 1984 the U.S. Customs
\nService, at the behest of the domestic textile industry, announced a
\nmuch more restrictive rule of origin for apparel, decreeing that the
\nnation of origin would depend not on where fabric was finally sewed
\nor assembled, but on the nation of origin of both the fabric and of
\nthe sewing.<\/p>\n
NAFTA builds on this precedent to concoct a super-protectionist
\nrule of origin for apparel. It requires not only that clothing be
\nsewed in North America from fabric made in North America, but that
\nthe yarn the fabric is made from also be from North America — a
\ntriple rule of origin.<\/p>\n
The intent of this “yarn forward” rule is to oblige Mexican and
\nCanadian apparel makers to buy yarn and fabrics from American
\ntextile mills before being allowed to sell clothing to U.S.
\nconsumers. This makes as much sense as forcing Belgian companies to
\nuse American sugar for their chocolate exports.<\/p>\n
Many types of yarn and fabrics are not produced in the U.S. But
\nMexican and Canadian companies that must rely on those yarns or
\nfabrics to produce products for export to the U.S. will have to get
\nspecial exemptions from the triple rule of origin. NAFTA will have
\nbyzantine regulations for determining whether specific yarns and
\nfabrics are in “short supply” in the U.S. And who will likely be the
\nfinal judge? The American textile industry’s best friend, the U.S.
\nCommerce Department. (During the mid-to-late 1980s, Commerce ran a
\nsimilar short-supply program for steel products; the General
\nAccounting Office concluded that Commerce officials “viewed it as
\ntheir responsibility . . . to keep foreign steel out of the U.S.”)<\/p>\n
The short-supply system could empower U.S. bureaucrats to heavily
\ninfluence which fabrics Mexican factories use to produce dresses
\nthat Americans will buy. At a June 29 closed-door meeting,
\nretailers, importers and apparel manufacturers presented a list of
\n117 fabrics they considered to be in short supply in North America;
\nU.S. textile manufacturers responded by insisting that only eight
\nfabrics are in short supply. Ron Sorini, the chief U.S. textile
\nnegotiator, who was present at the meeting, appears to have accepted
\nthe textile manufacturers’ claims. This means that the U.S.
\ngovernment is likely to deny short-supply exemptions in the vast
\nmajority of cases.<\/p>\n
The short-supply system will also hurt Canadian apparel makers.
\nFour years after President Reagan signed the Free Trade Agreement
\nwith Canada, the Bush administration is demanding that Canada accept
\nnew restrictions on the number of wool suits it can export to the
\nU.S. (The U.S. currently imposes no textile import quotas on
\nCanada.) Wool suits are one of Canada’s most successful garment
\nexports, and, since Canadian apparel makers import most of their
\nfabric from Europe, the “yarn forward” rule will throttle their
\ntrade with the U.S.<\/p>\n
Israel Shames, president of the Quebec Apparel Manufacturers
\nInstitute, estimates that NAFTA could halve Canada’s exports of some
\napparel items. Jack Kivenko, president of the Canadian Apparel
\nManufacturers Institute, estimates that NAFTA could result in the
\nloss of as many as 40,000 jobs in the Canadian apparel industry. Mr.
\nKivenko complains: “America is drawing up rules to keep the threat
\nof a Canadian apparel invasion down to a mere trickle. Every time
\nthe Americans ‘level the playing field,’ we find that Canadians have
\nhigher hurdles to jump.”<\/p>\n
Judging from the current negotiation, NAFTA is likely to sow
\nother seeds of national conflict. Customs Service Commissioner Carol
\nHallett told a congressional hearing in May that she presumes that
\nNAFTA will allow U.S. agents to enter Mexico in search of illegally
\nlabeled goods, as States News Service has reported. (Some
\ncongressmen fear that Mexican companies may purchase Chinese
\nclothing and attach a “Made in Mexico” label.) Last December, two
\nbusloads of heavily armed Customs agents pulled up outside of the
\nEmpire State Building in New York and ransacked the offices of 20
\ntextile companies, browbeating employees and seizing hundreds of
\nboxes and computer tapes to investigate whether the companies
\ncomplied with U.S. textile import regulations. If U.S. Customs
\nagents pulled a similar stunt in Mexico City or Toronto,
\nU.S.-Mexican or -Canadian relations could be devastated.<\/p>\n
Mexico currently provides barely 3% of U.S. textile and apparel
\nimports. Yet the archprotectionist textile rule of origin will
\nlikely be applied to other nations in the future. Textile negotiator
\nSorini explicitly declared that the yarn-forward rule will guide
\nfuture trade negotiations: “This will be a model for all future free
\ntrade agreements. We feel we have balanced the interests of
\nbusiness.”<\/p>\n
Furthermore, the U.S.’s preferential treatment of Mexican imports
\ncould hurt other Latin American nations. If, for example, both
\nMexico and Guatemala are shipping lace brassieres to the U.S. and
\nthe U.S. abolishes the 32% tariff for Mexican producers but retains
\nit for Guatemalan producers, then Guatemalan producers will be left
\nat a severe disadvantage. Puerto Rican government officials have
\nwarned that eliminating tariffs on Mexican textiles while
\nmaintaining tariffs on Caribbean textiles could torpedo the entire
\nCaribbean textile industry.<\/p>\n
NAFTA will give too much discretion to Customs Service employees,
\nwho have injected protectionist intention into previous trade laws.
\nThis February, for example, Customs bureaucrats bushwhacked Honda
\nwith a profoundly creative, retroactive interpretation of the
\nU.S.-Canada Free Trade Agreement, ruling that automobile engine
\nblocks that are cast, shaped, machined and finished at a Honda plant
\nin Ohio are not made in America. The Honda decision created much ill
\nwill north of the border, making many Canadians suspect that
\nhypocrisy is now the U.S.’s leading export.<\/p>\n
There is also danger in how much political ransom the Bush
\nadministration may pay Congress to get NAFTA approved. Democrats
\nhave already demanded a large increase in spending for government
\njob training programs to ameliorate the impact of NAFTA. However, as
\na recent Labor Department report showed, government job training is
\none of the worst things politicians can inflict on young workers.
\nThe Labor Department found that young male trainees in the Job
\nTraining Partnership Act, the nation’s premier job-training program,
\nhave significantly lower earnings than similar youths who were never
\ntrained by the government.<\/p>\n
The negotiations are not yet complete. The Bush administration
\nstill has a chance to drop its protectionist stance and make NAFTA a
\ntreaty worth signing. Free trade is not complex; it does not require
\nan army of bureaucrats to define and re-define it. It is
\nprotectionism that requires endless administrative gimmicks to
\ncamouflage its true nature. With each new politically contrived
\ndefinition of fair trade, the NAFTA negotiators are sowing the seeds
\nof future uncertainty, accusations and ill will.<\/p>\n
—<\/p>\n
Mr. Bovard writes often on trade.<\/p>\n","protected":false},"excerpt":{"rendered":"
OTD 34 years ago, I warned: “Pandering to protectionists is poisoning the North American Free Trade Agreement.” NAFTA’s managed trade squabbles sowed the seeds for future trade wars. Trump vindicated this article. Wall Street Journal, July 31, 1992: “Free trade is not complex; it does not require an army of bureaucrats to define and re-define […]<\/p>\n","protected":false},"author":1,"featured_media":23058,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[10,3157,377,4905,1012,1011,494,1818,708],"class_list":["post-23056","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-bush","tag-canada","tag-job-training","tag-managed-trade","tag-mexico","tag-nafta","tag-protectionism","tag-trade","tag-trump"],"yoast_head":"\n
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The Wall Street Journal called Bovard \"the roving inspector general of the modern state\" and Washington Post columnist George Will called him a \"one-man truth squad.\" His 1994 book, Lost Rights: The Destruction of American Liberty, received the Free Press Association\u2019s Mencken Award as Book of the Year. His Terrorism & Tyranny won the Lysander Spooner \"Best Book on Liberty in 2003\" award. He received the Thomas Szasz Award for Civil Liberties work, awarded by the Center for Independent Thought and the Freedom Fund Award from the Firearms Civil Rights Defense Fund of the National Rifle Association. Bovard\u2019s writings have been publicly denounced by FBI director Louis Freeh, the Secretary of Agriculture, the Secretary of Housing and Urban Development, the Postmaster General, and the chiefs of the U.S. International Trade Commission, the Drug Enforcement Administration, the Equal Employment Opportunity Commission, and the Federal Emergency Management Agency, as well as by many congressmen and other malcontents.","sameAs":["http:\/\/www.jimbovard.com","https:\/\/www.facebook.com\/jim.bovard","https:\/\/x.com\/jimbovard"],"url":"https:\/\/jimbovard.com\/blog\/author\/admin\/"}]}},"_links":{"self":[{"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/posts\/23056","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/comments?post=23056"}],"version-history":[{"count":1,"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/posts\/23056\/revisions"}],"predecessor-version":[{"id":23059,"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/posts\/23056\/revisions\/23059"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/media\/23058"}],"wp:attachment":[{"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/media?parent=23056"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/categories?post=23056"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jimbovard.com\/blog\/wp-json\/wp\/v2\/tags?post=23056"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/jimbovard.com\/blog\/wp-content\/uploads\/2026\/07\/1992-jpb-quote-jpeg-from-WSJ-NAFTA-article.jpg\")
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