President Donald Trump is doing the victory lap as he celebrates his new USMCA trade agreement. Which is, essentially, Nafta with the name changed. Which allows him to declare, a month before the midterms, victory – a victory that pleasures his base – and he can go, and bring them, home. Not bad as a piece of politics even if the economics of it all is both upside down and trivial.
For the thing is, really, not much has changed:
James Pethokoukis Trump’s new trade deal with Canada and Mexico fixes what he broke. But the new NAFTA changes very little.
The president’s rhetoric about his latest deal doesn’t match reality.
Yeah, pretty much, this isn’t economics nor even really a trade deal. This is political gloss from a salesman. Very effective political gloss from a very good salesman but that’s really all that it is.
A surprise clause in the new NAFTA about a western trade alliance against China, and the implications it carries for Canadian sovereignty, is a reminder that there are bound to be multiple, under-the-radar bomblets in a wide-ranging trade agreement negotiated behind closed doors and under deadline pressure. Alex has a list of other important USMCA provisions that trade experts feel haven’t gotten enough attention, including oil and water, IP, tariff fights, murky details on duty-free shopping, a lost opportunity on professional visas, and even Super Bowl ads. (More on some of these below.)
If these are the things people are worrying about then there’s not all that much there, is there?
Here are the biggest changes:
Country of origin rules: Automobiles must have 75 percent of their components manufactured in Mexico, the US, or Canada to qualify for zero tariffs (up from 62.5 percent under NAFTA).
Labor provisions: 40 to 45 percent of automobile parts have to be made by workers who earn at least $16 an hour by 2023. Mexico has also agreed to pass laws giving workers the right to union representation, extend labor protections to migrant workers, and protect women from discrimination. The countries can also sanction one another for labor violations.
US farmers get more access to the Canadian dairy market: The US got Canada to open up its dairy market to US farmers, which was a big issue for Trump.
Intellectual property and digital trade: The deal extends the terms of copyright to 70 years beyond the life of the author (up from 50). It also extends the period that a pharmaceutical drug can be protected from generic competition.
It also includes new provisions to deal with the digital economy, including prohibiting duties on things like music and e-books, and protections for internet companies so they’re not liable for content their users produce.
No, really, that’s all there is to it. Something that can be sold at election time and other than that pretty much nothing of any substance. Which might rather explain why it has all been concluded one month before those midterms.
As in the headline, Donald Trump has renamed Nafta, pleasured his base and declared victory. Thankfully – at least he’s not really caused any great damage even as he’s not done any good at all.
Trump must recapture the agenda back from groping in 1982 and new calls today to fish through 20 years of his tax returns.
But, no, that’s not all there is to the USMCA, and that’s the problem. Look at the American busybodyism toward the Mexican labor force in the name of “free trade.”! (Also a requirement that Mexico not patronize “sweatshop countries.”) NAFTA wasn’t FT, and this one isn’t either. NAFTA was not “the worst trade deal ever”; it cost a lot of jobs stamping out widgets, and made those people managers of Mexican maquilas at much higher pay.
The extension of IP protection terms is not “nothing of substance”. It’s effectively theft from the “commons” – in other words the people by corporations and cronyism.
There is plenty of cronyism in the USMCA, as in NAFTA before it. One of the few powers the US Constitution grants the US government is to “secur[e] for limited times…the exclusive right to…writings and discoveries.” Don’t know about our two partner nations. The duration of these “limited times” is obviously left to legislation. A change does not belong in a trade treaty, nor do we have the Constitutional power to dictate what the “limited times” should be anywhere else. What should the interval be? An individual’s career is 30 years. The new figure of 70 years is paradise for… Read more »
It’s simple protectionism, but acknowledging that for any protectionism to work it has to include within the walls cheap suppliers. Whether that be the British Empire having cheap timber from Canada or the USA having cheap labour from Mexico.
No, NAFTA had notorious “labor and environmental side agreements” that had the effect of treaty without a supermajority ratification vote. And USMCA’s clauses on autoworker (and parts-maker) wages explicitly try to raise Mexican pay scales (or eliminate Mexico as an option, which is indeed simple protectionism).
This is unfortunate, because the wage differential is the big reason cross-border combinations are useful.
The extension of IP protection terms is not “nothing of substance”. It’s effectively theft from the “commons” – in other words the people by corporations and cronyism.
There is plenty of cronyism in the USMCA, as in NAFTA before it. One of the few powers the US Constitution grants the US government is to “secur[e] for limited times…the exclusive right to…writings and discoveries.” Don’t know about our two partner nations. The duration of these “limited times” is obviously left to legislation. A change does not belong in a trade treaty, nor do we have the Constitutional power to dictate what the “limited times” should be anywhere else. What should the interval be? An individual’s career is 30 years. The new figure of 70 years is paradise for… Read more »