Meet President Trump's 'New' NAFTA, Same As the Old NAFTA

Meet President Trump's 'New' NAFTA, Same As the Old NAFTA
AP Photo/Judi Bottoni, File
Story Stream
recent articles

NAFTA lives. It has just undergone a name change. We’re still waiting for the smoke to fully clear on the new NAFTA agreement, but the results of a year of sometimes intense talks are plain: President Trump slapped a new name on an old deal, gained a little ground and lost some, and ended up where things started.

It’s hard to find in the new deal anything that wasn’t in the old deal or included in the Trans Pacific Partnership that Trump walked away from the week he took office. Replacing NAFTA with the United States Mexico Canada (USMC) agreement (with apologies to the U.S. Marine Corps) is the trade negotiating equivalent of changing the name of Dunkin’ Donuts to Dunkin’. Or Kanye West changing his name to ye. It’s a marketing ploy or an ego trip.

What Trump has essentially done here is what he has done for so long in real estate — slapped his name on an existing structure.

The stock market seems to approve of the deal. A more precise way of putting that is the market approves of the fact that the new deal is essentially the same as the old deal. The stock market gain today is actually the sound of relief on Wall Street.

Trump called NAFTA 1.0 the “worst deal in history” and TPP potentially even worse. But after devoting precious time and resources, and diminishing goodwill toward the United States, we now have NAFTA 2.0, little changed from NAFTA 1.0, with some updating that was already included in TPP.

No wonder Canadian Prime Minister Justin Trudeau called the conclusion of negotiations “a great day for Canada.” He successfully fended off protectionist barbarians from the NAFTA gates.

International trade lawyer Dan Ujczo says “more than two-thirds of the chapters in NAFTA 2.0 “can be traced” to the TPP. It’s easy to see his point. NAFTA now takes into account changes in the economy since it was first approved 24 years ago, setting new rules governing financial services, digital services and intellectual property, as well as wage guarantees — changes that were part of TPP.

Canada secured the right to preserve what it cared about most, with the Trump Administration giving up demands to open up cultural industries and scrap the nation-to-nation dispute settlement process.

Trump aimed at the auto industry, but mostly missed his target. NAFTA 2.0 does include a cap on auto imports from Canada and Mexico, but it is a Pyrrhic victory for Trump since the cap is well above what the two countries export to the United States. The cap is especially irrelevant to Canada, which primarily exports parts to the United States, not finished vehicles. If the Trump Administration moves forward with the imposition of national security curbs on auto imports, Canada has effectively negotiated an exemption, as exports of cars and from Canada to the United States will be tariff-free up to a point, almost certainly above what Canada already sends south of the border. The required North American content of vehicles to move tariff-free has been increased from 62.5 percent to 75 percent, but companies will continue to be able to move parts across the border by paying a small 2.5 percent tariff. If the U.S tariff for countries other than Canada and Mexico is increased for security reasons, the price will be paid by Detroit-based auto companies and American consumers.

The United States also gave up its bid for a five-year sunset clause. In its stead, the agreement includes a review after 16 years. That represents yet another Pyrrhic victory since NAFTA could always have been renegotiated at the U.S request.

One of Trump’s few “wins” was increased access to the closed Canadian dairy market. But that was also included in the TPP. U.S officials say the increased access is somewhat greater than under the TPP, but left unsaid is whether it will exceed concessions Canada has already agreed to with the EU.

With these tweaks - and with similarly cosmetic changes to the U.S trade agreement with South Korea, trade negotiations with the EU, the stand-off with China, and the strong prospect Trump will try to get the United States back into TPP - what we are seeing is nothing less than the cresting of a wave of protectionism. A dangerous and naive nationalistic dream is becoming the victim of global economic reality.

Allan Golombek is a Senior Director at the White House Writers Group. 

Show comments Hide Comments

Related Articles