Trump’s NAFTA
Trade deal doesn’t match the hype.
It’s hard to outdo the hype every time Apple introduces a new version of its iPhone. But if anyone rates higher on the hype meter, it’s President Donald Trump, who seems to describe everything he does as the biggest, greatest, most significant step ever taken in America, if not the world.
The latest example of the president’s preternatural boastfulness was his announcement of a new treaty to replace the North American Free Trade Agreement. Despite Trump’s assertion last week that “it’s a brand new deal,” the new United States-Mexico-Canada Agreement, or USMCA, is more like NAFTA 2.0. It has a few interesting wrinkles and some important updates that don’t really change its basic operating system.
None of the tinkers to NAFTA are likely to greatly impact the $187 billion in annual trade between Texas and Mexico or the $40 billion in trade between Texas and Canada. Even so, the proposed treaty, which needs congressional approval, has eased fears that NAFTA might die without a replacement and hurt not only the state’s gas and oil industry but ranchers and farmers as well.
There’s little in the new NAFTA that should excite energy companies, and the only agricultural provisions receiving much attention concern milk and cheese products mostly made in Wisconsin. U.S. producers will be allowed to supply up to 3.6 percent of Canada’s dairy market, which is about the same level agreed to in the Trans-Pacific Partnership treaty that the Trump administration abandoned.
The USMCA’s auto industry rules are getting more news coverage. They would increase the percentage of American-made parts required in cars sold duty-free in the United States and require the wages of a higher percentage of some Mexican autoworkers to be closer to what their American counterparts make.
Some analysts predict automakers may prefer to pay the measly 2.5 percent tariff they would be charged for not following the new USMCA car parts rules and consider it just another cost of doing business.
Car plants in Mexico could decide to sell fewer small cars in the United States because their size makes it harder to meet the parts percentage rule. As analysts point out, Americans seem to prefer larger vehicles anyway.
All things considered, the USMCA doesn’t match its hype. NAFTA needed upgrades, such as to intellectual property rights in the digital age, but Trump didn’t need to trash the 25-year-old treaty to fix it.
Trump’s insistence on killing a thing make it better is a reminder of his approach to the Affordable Care Act. The president has tried to cripple the ACA, but it survives because he can’t come up with anything better. Maybe if he just changed Obamacare’s name, the law could be improved and more Americans without health insurance could get the coverage they need.