North American trade pact on 3rd anniversary: Optimism is rising for US and Mexican workers
WASHINGTON — To President Donald Trump, America’s trade relationship with Mexico was intolerable. He seethed over the U.S. trade deficit and the shuttered factories in America’s heartland. “No longer,” he vowed six years ago, “are we going to allow other countries to break the rules, to steal our jobs and drain our wealth.”
So Trump pressured Mexico and Canada to replace their mutual pact with one more to his liking. After a couple of years of negotiations, he got what he wanted. Out was the North American Free Trade Agreement. In was the U.S.-Mexico-Canada Agreement.
The USMCA, which Trump hailed as “the fairest, most balanced and beneficial trade agreement we have ever signed,” will reach its third anniversary Saturday.
The trade pact hasn’t proved to be the economic bonanza Trump boasted it would be. It couldn’t have been, given that trade makes up less than a third of America’s $26 trillion economy.
Yet while the the deal’s overall impact has been slight, it has nevertheless been helping workers on the ground. It’s just that the beneficiaries have so far been mostly in Mexico. Novel provisions of the pact have enhanced the ability of long-exploited Mexican workers to form unions and secure better wages and working conditions.
Trade officials and experts predict, though, that the benefits will also flow, in time, to U.S. workers, who no longer must compete with severely underpaid Mexican laborers without real bargaining power.
“U.S. workers win when workers in other countries have the same rights,” said Cathy Feingold, director of the AFL-CIO’s international department.
Thea Lee, a deputy undersecretary at the U.S. Labor Department, suggested that the pact and Mexico’s reforms haven’t been around long enough to yield measurable help to American workers yet. “We’re going to see the positive results first for Mexican workers because Mexico is undergoing a massive, comprehensive, ambitious labor market reform,” she said.
In some ways, the USMCA as a whole has fallen short of Trump’s promises.
Take the trade deficit with Mexico. Despite Trump’s insistence that the USMCA would pull more manufacturing back to the United States, the gap between what America sells and what it buys from Mexico keeps widening: It has surged from the $64 billion gap in 2016 that so irritated Trump to a record $139 billion last year.
The former president also predicted that exports of U.S. auto parts to Mexico would rise by $23 billion. They have increased since 2020 — but only by about $8 billion.
“I don’t expect that we’re ever going to be able to say that (the USMCA) accomplished very much,” said Alan Dierdorff, a professor emeritus of economics and public policy at the University of Michigan. “I don’t think it hurt much. But I don’t think it helped much.”
Trump said the pact would create 76,000 auto industry jobs. Since January 2020, vehicle and parts manufacturers have actually added nearly 90,000 jobs. And North American commerce has flourished. America’s trade with Canada and Mexico — exports plus imports — reached a record $1.78 trillion last year. That was up 27 percent from 2019 and was above a 20 percent gain in trade with China over the same period.
But it’s hard to tease out which economic gains can be credited to the USMCA and which happened for a variety of unrelated reasons. That is especially true in light of the unusual economic tumult of the past three years: A devastating pandemic, followed by severe labor shortages and supply chain backlogs and a resurgence of rampant inflation.
Also complicating any effort to calculate the USMCA’s impact is President Joe Biden’s own aggressive efforts to rejuvenate American industry with trillions of dollars in infrastructure spending and subsidies.
For all of Trump’s bombast, the USMCA actually left in place much of the pact it replaced. NAFTA erased most of the import taxes that the United States, Mexico and Canada imposed on each other’s goods. It created a duty-free regional bloc meant to compete with the European Union and China. That structure remains mostly in place.
“It’s still pretty much the same as NAFTA,” Dierdorff said.
Still, some substantive changes have occurred. When NAFTA took effect in 1994, for instance, the internet, e-commerce and smartphones weren’t part of everyday business. The new pact updated North American trade rules for the digital age.
The USMCA, for instance, bars the United States, Mexico and Canada from hitting each other with import taxes on music, software, games and other products sold electronically; allows the cross-border use of electronic signatures and authentication; and protects companies from having to disclose in-house source codes and algorithms.