Worst trade deal, best trade deal: It de­pends on when you ask

Arab News - - Opinion - AN­DREW HAM­MOND

The new US-Mex­ico-Canada agree­ment (USMCA), one of the most com­pre­hen­sive trade agree­ments out­side the EU, comes into force on Wed­nes­day. While the deal re­mains shrouded in po­lit­i­cal con­tro­versy, it un­der­lines the lim­its to the cur­rent de-glob­al­iza­tion era fu­eled by the coro­n­avirus pan­demic.

The USMCA, in ef­fect a North Amer­ica

Free Trade Agree­ment (NAFTA) 2.0, will be a po­lit­i­cal corner­stone of eco­nomic re­la­tions on the con­ti­nent, in­clud­ing more than $1 tril­lion in an­nual trade. But amid the cel­e­bra­tions of what even “Amer­ica First” Pres­i­dent Don­ald Trump has called a “won­der­ful” and “his­tor­i­cal trans­ac­tion,” there re­mains much po­lit­i­cal angst. NAFTA, orig­i­nally signed in 1994 dur­ing

Bill Clinton’s pres­i­dency, was the first ma­jor trade ac­cord be­tween a de­vel­op­ing coun­try (Mex­ico) and de­vel­oped coun­tries (the US and Canada). In that dis­tinc­tive era, soon af­ter the end of the Cold War, eco­nomic glob­al­iza­tion was largely un­chal­lenged as a po­lit­i­cal or­tho­doxy across much the world.

Re­flect­ing the ero­sion of po­lit­i­cal sup­port since then for in­ter­na­tional trade, in 2016 Trump called NAFTA “the worst trade deal maybe ever signed any­where.” In the US, the po­lit­i­cal right and left have both blamed it for con­tribut­ing to a hol­low­ing out of the US man­u­fac­tur­ing in­dus­try, partly be­cause of in­creased trade deficits with Mex­ico and Canada. That is why Trump has given the pact a brand­ing re­fresh to the USMCA, end­ing what he calls the “NAFTA night­mare,” de­spite the ma­jor con­ti­nu­ities be­tween the two.

A sign of this trou­bled po­lit­i­cal land­scape came last Wed­nes­day when, even be­fore the USMCA agree­ment takes ef­fect, US trade chief Robert Lighthizer threat­ened Canada and Mex­ico with lit­i­ga­tion. Amid US elec­tion year pres­sures over in­ter­na­tional trade, Lighthizer’s strong­est warn­ing was di­rected at Mex­ico; he said it needed to im­ple­ment the im­proved worker rights it agreed to in the deal, and “we will take ac­tion early and of­ten when there are prob­lems” so as not to al­low a com­pet­i­tive ad­van­tage over the US.

Canada was also in his sights over open­ing up its do­mes­tic dairy mar­ket, and he claimed that Ottawa had a his­tory of play­ing games that ef­fec­tively shut out for­eign com­peti­tors even af­ter a trade deal was reached. This is a key is­sue for US farm­ers, an­other key voter bloc in sev­eral swing states in Novem­ber, and Lighthizer as­serted that “if there’s any shad­ing of the ben­e­fits to Amer­i­can farm­ers, we’re go­ing to bring a case.” US elec­tion is­sues aside, what Wed­nes­day’s in­ter­ven­tion un­der­lines is that, de­spite

Trump’s self-pro­claimed ne­go­ti­at­ing ge­nius, the new USMCA will con­tinue to present po­lit­i­cal chal­lenges in the US, partly of his own mak­ing. To be sure, the deal con­tains wins for the US, in­clud­ing the lim­ited (but not full) open­ing of Canada’s dairy mar­kets.

But Wash­ing­ton com­pro­mised too, ac­ced­ing to Ottawa’s re­quest to pre­serve a trade dis­pute set­tle­ment mech­a­nism while pro­tect­ing Canada’s auto in­dus­try from fur­ther US tar­iffs. The rene­go­ti­a­tion was there­fore not the huge po­lit­i­cal win he as­serts and, hav­ing over­sold the ex­tent of the NAFTA makeover, he now there­fore needs to avoid po­lit­i­cal at­tack from Democrats be­fore Novem­ber.

The po­lit­i­cal con­tro­versy over USMCA ex­tends be­yond the US to Canada and Mex­ico, which were tra­di­tion­ally en­thu­si­as­tic about NAFTA. In part, this is be­cause Trump eroded much goodwill with both coun­tries af­ter more than a year of ac­ri­mo­nious USMCA ne­go­ti­a­tions that left a sour taste.

Trump put Canada un­der in­tense pres­sure, pos­ing an acute dilemma for Prime Min­is­ter Justin Trudeau’s ad­min­is­tra­tion, be­cause NAFTA un­der­pins three quar­ters of Canada’s ex­ports to the US and 2.5 mil­lion Cana­dian jobs de­pend on that trade. Trump ref­er­ences to Ottawa’s “decades of abuse” of Wash­ing­ton alarmed a sig­nif­i­cant num­ber of rep­re­sen­ta­tives in the US Congress who rec­og­nize the im­por­tance of strong re­la­tions with their north­ern neigh­bor.

Amid all this po­lit­i­cal wran­gling, the fact is that the lit­tle-loved USMCA could now help drive North Amer­ica’s eco­nomic re­cov­ery from the coro­n­avirus re­ces­sion. The scale of the down­turn in the con­ti­nent is un­der­lined by data that shows the value of freight hauled across the US, Canada and Mex­i­can bor­ders de­creased in April by the largest amount since records be­gan — re­duc­ing more than 44 per­cent com­pared with April 2019.

There is clear ac­knowl­edge­ment in the White House, de­spite Lighthizer’s com­ments, of the im­por­tance of USMCA to reignit­ing the econ­omy. As Trump’s eco­nomic adviser Larry Kud­low said: “Canada and Mex­ico are very im­por­tant trade part­ners. The new North Amer­i­can free trade ac­cord is … go­ing to add quite a lot to GDP and jobs.”

This un­der­lines the per­ils of the elec­tion cam­paign tightrope that Trump must now walk as he seeks to stim­u­late eco­nomic growth while avoid­ing po­lit­i­cal at­tack over trade is­sues. It is surely one of the big­gest para­doxes of his pres­i­dency that his re­elec­tion hopes may now rest, in part, upon the suc­cess of a re­heated NAFTA deal that he pre­vi­ously as­serted was the worst trade deal ever ne­go­ti­ated.

Newspapers in English

Newspapers from Saudi Arabia

© PressReader. All rights reserved.