Time will tell if new trade deal will be better or worse than NAFTA

The newly signed U.S.Mexico-Canada Agreement (USMCA) has one claim to fame: It’s bipartisan legislation that was passed while the president is facing impeachment.

Aside from that, the tepid legislation’s biggest historical accomplishment might only be not getting constantly referred to as “NAFTA 2.0” — if, in fact, it can get away from its dastardly predecessor.

There are things to like in the new USMCA trade deal. But they could be overshadowed by not-so-great unintended consequences.

For instance, theoretically, the new pact will result in more car and truck parts being manufactured in North America.

To qualify for zero tariffs, a car or truck would have to have 75% of its components manufactured in Canada, Mexico or the United States, instead of the currently stipulated 62.5%.

But there’s always the chance that such requirements will drive up the cost of smaller cars, and their manufacturing will be shipped off to Asia, where it would be tough to compete with their low wages.

And speaking of wages, the new trade deal requires that Mexico change its laws to make it easier for workers to unionize. This should increase wages for Mexican workers, making it less appealing for companies to move jobs from the U.S. to

Mexico.

The Trump administration, Democrats and U.S. labor unions even pushed for a formal committee to monitor Mexico on labor issues, creating positions called “labor attachés” for people who would be based in Mexico to monitor benchmarks that could trigger penalties if wage increases aren’t met. This strikes me as fanciful. Our neighbor to the south has the labor-friendliest president in decades. But the unions and labor courts in Mexico have the reputation of being as corrupt as the government they no doubt collude with to keep wages low enough to lure the U.S. and other manufacturers to relocate their operations to the border.

Part of the reason is that, for everyone, but especially for the Mexican people who live in the direst poverty you could imagine, low wages are infinitely better than no wages.

In 2015, I was in Juarez touring factories and the shantytowns where the workers live. I visited a plant that boasted $16 billion in revenue per year, but the workers there averaged $200 per month, with possible cash bonuses for attendance, punctuality and productivity totaling maybe another $140 per month. Supervisors and other higher-paid workers could make anywhere from $430 to $600 per month.

Think about what kind of economic and living conditions make a job that pays roughly $300 a rational choice for people trying to feed their families.

Citing recent history in both the U.S. and Mexico, economist Robert E. Scott isn’t super sunny:

“The USMCA will in no way offset or reverse the massive devastation caused by the original NAFTA agreement.

Nor is the deal a ‘model for future trade agreements,’” wrote Scott, senior economist and director of trade and manufacturing policy research at the left-leaning Economic Policy Institute (EPI), on the EPI blog.

Considering the times we’re living through, this may be a major accomplishment in and of itself. But only time will tell if the USMCA will actually help workers on both sides of the border or merge easily into the legacy of the little-guy-crushing NAFTA.