Nafta II is a game changer we need to confront

Donald Trump described the North American Free Trade Agreement as the worst agreement ever — even worse than the Trans-Pacific Partnership agreement — and vowed to rewrite it to put America first or rip it up. That promise resonated with swing state voters.

American workers, small businesses, First Nations and the environment have suffered under Nafta. American corporations have been the big winners, as they would have been from the TPP.

Armed with threats, insults and sanctions, Trump has succeeded in replacing the 25-year old Nafta with the unimaginatively but honestly named US Mexico Canada Agreement (USMCA). We don’t know if this will be a new US template and supplant the World Trade Organisation that is also under attack from the Trump administration.

Some have dismissed the new deal as crude protectionism or a cynical rebranding so Trump appears to deliver his election promise. Both criticisms miss the bigger picture. Three salient points need noting.

First, Trump’s unilateralism is driven by a visceral aversion to China and its threat to US hegemony. That’s not new. Most Democrats share that view. Obama sold the TPP (unsuccessfully) as the US writing the 21st century rules, not China. Trump has gone further. The new pact says any party that negotiates a free trade agreement with a non-market country — meaning China — must disclose that fact, along with draft texts, and the other parties can kick it out of the USMCA.

If the US repeats this provision in its new and revised agreements, countries will be forced to choose China or the US. Prospects of a new cold war through free trade agreements are now very real and pose a huge challenge for Australia, New Zealand and many others.

Second, the Democratic Party is like a possum in the headlights. Its instinct is to oppose whatever Trump does. But that’s not enough. Trump is poaching the party’s voter base.

On automobiles, the new deal requires more content produced in the three countries and a minimum wage of US$16 an hour for 40 per cent of that content — Mexican auto workers generally earn less than US$2 an hour. The deeply unpopular right of investors to sue states will end between US and Canada after three years, and is severely wound back with Mexico, except for the powerful energy and utilities sector. The US even agreed to an exception on indigenous rights that goes beyond the Treaty of Waitangi exception in the TPP that the NZ Government insists cannot be improved.

Third, the big corporate gains from the original TPP text have been imported and strengthened by restoring the original US proposals. That includes even longer monopoly rights on new generation super-expensive biologic medicines, and an electronic commerce chapter basically written by and for Google, Amazon, Facebook and Big Tech to cement their oligopoly.

We need to think smarter and recognise that Nafta-II is a massive game changer. In the US recently, Prime Minister Jacinda Ardern seemed to suggest there are only two choices — the unilateral power plays of a populist and protectionist autocrat or the “multilateral rules-based system” established over 30 years of neoliberalism.

As with the US Democrats, we in Aotearoa need to confront these challenges and build the momentum and political will to advance an alternative paradigm of international economic relations. A two-day hui on what an alternative and progressive trade strategy should look like, at the Fale Pasifika at University of Auckland this Friday and Saturday, aims to launch that conversation.