By F.H. Buckley
NAFTA 1.0 wasn’t the terrible deal President Trump said it was, but NAFTA 2.0 is an improvement and, more importantly, it tells us good things about Trump’s skill at deal making.
An agreement with Canada needed to be reached. Nine million US jobs depend on goods and services we ship to our northern neighbor. With what they buy from us, Canada is the biggest export market for 36 states. There’s a very modest trade deficit on goods, but when you add in services, we have a trade surplus.
The economies of the two nations are closely intertwined, and Canadians are painfully nice. If you can’t cut a trade deal with them, with whom can you do so?
So across the world, people took notice when Trump began quarreling with Canadian Prime Minister Justin Trudeau. Mind you, the Canadians seemed to be playing above their weight. They implied that Trump was a threat to democracy, not a good thing to do when you’re trying to cut a deal.
What happened next was right out of “The Art of the Deal.” Trump showed that he took the criticism personally and raised the stakes. The crucial non-negotiable for Canada was the protection it gives to Canadian content on radio and TV. That was something the Canadians had insisted on in NAFTA 1.0, so Trump put that on the table. Then he said that the dispute-resolution mechanism, which sends disputes about the deal to arbitrators, would have to go. That’s a big deal because, guess what, we cheat. So do the Canadians. Everyone cheats, over things like anti-dumping allegations and crazy tort awards in places like Mississippi.
That got the attention of the Canadians, but Trump’s next move sent them for a loop. From what Trump had said about Mexico, the Canadians assumed that they’d be looking after their little Mexican brothers. But Canadian arrogance didn’t play well with the Mexicans, who pre-empted Canada with a US-Mexican trade deal, which gave away the dispute-resolution mechanism. Thank you very much, but we can look after ourselves, the Mexicans told Justin Trudeau.
Trump acted as if NAFTA was a deal he didn’t need, and that got the attention of Mexico and Canada. The new deal opens up Canada’s dairy market for American farmers, gives our intellectual property better protection and leaves the steel tariffs for further discussion.
What emerged from the final tripartite deal announced Monday morning is a triumph for the US, and for Trump personally. It tells the world that, if he can get tough with Canada over trade deals, he can get tough with every country. It also tells the world that it’s all about protecting Americans and especially American workers.
So what happened Monday morning was mostly symbolism. We didn’t do something absolutely stupid, like beginning a trade war with Canada. And we sent a message to everyone else that we play tough. NAFTA 2.0 is a shot across the bow to China, and that’s the elephant in the room.
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