President of the United States and self-proclaimed “genius” Donald Trump celebrated the new trade deal with Mexico and Canada, hailing it a tremendous victory.
“Throughout the campaign I promised to renegotiate NAFTA, and today we have kept that promise,” Trump said of his updated agreement: the (in Trump’s words) “incredible new U.S.-Mexico-Canada agreement called USMCA.”
Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico. The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many......— Donald J. Trump (@realDonaldTrump) October 1, 2018
....deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!— Donald J. Trump (@realDonaldTrump) October 1, 2018
Trump has long lambasted the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) as the worst negotiated deals ever.
Then, what has Trump done differently than the Obama administration that warrants this so-called victory dance?
According to critics, many of the provisions of the “new” deal, called the United States-Mexico-Canada Agreement (USMCA), are eerily similar to the ones Trump has long blasted, by the Obama administration.
So, if there is anyone to thank for this “new” tremendous deal, it really should be former President Barack Obama. In fact, many of the men and women who stood behind Trump, as he sang praises for the USMCA, were the same career service staff who negotiated the TPP.
Therefore, Trump essentially promised a new deal and then re-named NAFTA with provisions that have not actually changed.
“Ironically, he called them horrible negotiators when running for office,” said Trevor Kincaid, the spokesman for the United States Trade Representative’s office under Obama. “It’s really the same with a new name. It’s basically the ‘22 Jump Street’ of trade deals.”
Jared Bernstein, formerly Vice President Joe Biden’s top economic adviser, agreed some pro-labor changes in the new deal are a welcome change but Trump’s assertion that he has coined an entirely new deal is in no way true.
“It’s not the slightest bit credible to argue that NAFTA or TPP were massive disasters but that USMCA is perfection,” Bernstein said. “You create a period of disruption and chaos. You bring it to a close. And you declare victory regardless of the outcome.”
But that has exactly been Trump “Modus Operandi.”
TPP could have easily been a replacement for NAFTA since it covered both Mexico and Canada. In addition, it also covered Japan, which would have worked well since many trade experts were of the opinion that covering Japan would put on a leash on China’s growing economic dominance, especially in the Western Pacific.
But Trump and the Congress did not approve it.
Despite borrowing many provision from TPP, Trump branded USMCA a “brand new deal.”
“To some degree, we have wasted our time by redoing what was in the Pacific trade deal,” said James Pethokoukis, a trade expert at the American Enterprise Institute. “There’s a lot of overlap.”
USMCA covers dealing with online commerce and intellectual property protections, which are pretty similar to the ones covered by TPP.
Trump had previously called Canada’s protectionist policies for its dairy farmers a “deal breaker,” however, USMCA on the issue, again borrows from TPP on how to resolve the debacle. Canada will open a small percentage of its market to U.S. dairy farmers for certain products. However, there is one significant change; the market will be entirely for U.S. dairy farmers and not divided between 11 countries, which would definitely be an improvement from TPP.
The one major change that the “new” deal has from both NAFTA and TPP is the manufacturing of automobiles.
NAFTA currently requires 62.5 percent of a car’s value to be made in North America and to cross borders tariff-free. The new deal would raise that to 75 percent and at least 40 percent of the car’s labor to be paid up to 16$ per hour.
The increased rates may veer manufactures from making new plants in North America and the business would potentially remain in the U.S. It would also reduce the wage difference between the United States and Mexico, according to Bernstein.
But for any of these “changes” to be approved, the Congress would have to give it a yes.
Trump said he would sign the deal at the end of November, by which time, thanks to the midterm elections, the control, at least in the House, might switch from Republicans to Democrats.
In case it does and the Congress rejects the new deal, the NAFTA deal would remain how it is. Trump, then, can formally withdraw from the deal but that may also require Congress’ approval.
In any case, with only a few fundamental changes, the new and old deals are not that huge a difference to begin with.
Thumbnail/ Banner Credits: REUTERS/Kevin Lamarque