Economy

NAFTA is Dead. Long Live NAFTA (and TPP)

JM Ashby
Written by JM Ashby

As a midnight deadline for negotiations approached last night, Canada announced that it had reached an agreement with the United States and Mexico to more or less preserve the North American Free Trade Agreement (NAFTA) as it is.

The new agreement will not be called NAFTA, however, because Trump insisting on renaming it.

Although the overwhelming majority of the agreement will be identical to NAFTA, it will be called the United States-Mexico-Canada Agreement or USMCA if it's eventually adopted by all three governments.

As far as the Unites States is concerned, most of the changes to NAFTA could be described as cosmetic or inconsequential, but that is not necessarily true for our trading partners. Mexico and Canada, for example, were able to obtain protection from Trump's threat to impose tariffs on automobiles.

From Bloomberg:

The deal struck Sunday offers a measure of protection for both Canada and Mexico, ensuring each country won’t be affected by any auto tariffs unless exports top 2.6 million units annually.

For each, that represents their current exports plus growth of at least 40 percent -- enough to mean that if the tariffs are leveled against the rest of the world, they likely wouldn’t hit Canada and Mexico for a couple of years.

That may seem like a major concession on the part of the Trump regime because it is.

And it's not the only major concession Trump has made.

The deal doesn’t resolve the dispute over U.S. tariffs on steel and aluminum imports from Canada and Mexico -- or the retaliatory tariffs that each country placed on them. But going forward, it did give a guarantee that no tariff applied under the same U.S. law could be imposed against Canada or Mexico for at least 60 days.

[...]

Nafta had three kinds of dispute settlement systems. The new deal will see two remain basically unchanged, but renamed, according to senior White House officials. State-to-state dispute settlement -- formerly in Chapter 20 -- is being kept. It has many critics, particularly in the labor community, because panels often get blocked and disputes linger for years.

The old Nafta’s so-called Chapter 19 dispute-settlement mechanism -- which hears bi-national anti-dumping and countervailing duties cases -- remains untouched in the new agreement, the officials said. Canada dug in to save those.

[...]

The U.S. had demanded a sunset clause that would kill Nafta after five years unless the countries agreed to extend it. Few ideas upset the Canadians and Mexicans more than that. In the end, the countries agreed to a 16-year term for the deal, with a review to identify and fix problems and a chance of a deal extension after six years.

Now, we can't say the Trump regime got nothing out of the new deal, but we can say what they got wasn't exactly an original idea.

Canada has agreed to increase market access for American dairy farmers, but the funny thing about that is increased access was a key provision of the Trans Pacific Partnership (TPP).

The Obama administration had already spent years negotiating access to more markets under the Pacific Partnership before Trump unilaterally withdrew from the agreement soon after taking office.

Riding a wave of faux populist sentiment partially fueled by liberals and Democrats like Bernie Sanders, Elizabeth Warren, and several labor unions who all opposed the TPP for unsubstantiated reasons, Trump withdrew from a trade deal that would have effectively replaced NAFTA with a better deal that would have benefited all parties involved. The Trump regime is now using some parts of the TPP framework negotiated by the Obama administration to patch existing deals.

And to add an extra layer of irony, the Trans Pacific Partnership was explicitly pitched as a deal to contain the influence of China which has grown exponentially since Trump withdrew from the partnership and started a trade war.

To be clear, The North American Free Agreement (NAFTA) is still the law and it will be for at least the next year. The United States-Mexico-Canada Agreement (USMCA) must be approved by lawmakers in Mexico, Canada, and the United States. All three governments could look substantially different next year so it is within the realm of possibility that the USMCA will never become law just as the Trans Pacific Partnership never became law.


  • Badgerite

    Provisions from the TPP attached to the NAFTA and relabled. You know, the provisions the Black Guy negotiated.
    The Art of the Steal.

  • muselet

    Jeet Heer in The New Republic:

    The major victory for the Trump administration is that the Canadian market will be opened up for more American dairy products. But, as The New York Times notes, this opening “is similar to what the United States would have gained through the Trans-Pacific Partnership, a trade treaty that President Trump withdrew from last year.” Under the new agreement, the United States would now have access to 3.6% of Canada’s dairy market (TPP would’ve opened up 3.25% of the dairy market). In other words, the most significant concession Canada made was only slightly larger than what it had already been prepared to make. Aside from dairy products, the United States gained a concession on copyright, which will now be extended in Canada to 70 years after the original copyright holders death (currently it is 50 years).

    [links omitted]

    All that noise, all that bluff and bluster, and the result is a renamed trade agreement—maybe Donald Trump thinks the new initialism will remind RealMurcans! of the Marine Corps?—with a few vaguely different terms dotted through it.

    The mountain labored and didn’t even manage to bring forth a mouse.

    –alopecia

    • JMAshby

      Right? It’s somehow even more underwhelming than I expected it would be.

      Even the dairy thing is underwhelming. I won’t say it’s inconsequential because I’m sure a small number of farmers in Wisconsin will notice, but it may as well be. Nothing in this deal is going to propel economic growth more than NAFTA as a whole already did.

      There’s a provision in the deal that will raise wages for Mexican automobile workers, so yay for them.

    • 1933john

      What would you expect from a boy in love?

  • Aynwrong

    Worst. Negotiator. Ever.

    That said, he got what I’m guessing he really wanted. A name change. He gets to put his stamp on it.

    • Draxiar

      That’s exactly what I was thinking. Just as in business he makes money by farming out his name and this is a variation of that. That said, after his time in office is up his name won’t likely be worth all that much if anything. At least I hope not.

    • Yep. It’s irrelevant to him at this point if it even gets implemented. He claims victory and his stupid supporters believe him. It’s accomplished in his mind, so no need for any messy follow up.