Trump’s Rebrand of NAFTA

Source Link

By Sheelah Kolhatkar

On Monday morning, President Trump stood in the Rose Garden of the White House and announced the end of the North American Free Trade Agreement. He had long characterized the pact—which, in 1994, created a free-trade zone in North America—as “perhaps the worst trade deal ever made.” At the press conference, he claimed that the treaty had led to enormous American trade deficits, and the loss of millions of manufacturing jobs. “For twenty-five years as a civilian, as a businessman, I used to say, ‘How could anybody have signed a deal like nafta?’ ” Trump said. “Throughout the campaign, I promised to renegotiate nafta, and today we have kept that promise.” The agreement came after months of negotiations and a dramatic threat from the United States that it would leave Canada, its second-largest trading partner, out of the deal altogether, or impose tariffs on Canadian automobiles, if Canada didn’t submit to its demands. On Sunday, Canada finally capitulated. The new treaty, Trump announced, would be called the United States-Mexico-Canada Agreement. “It sort of just works . . . U.S.M.C.A.!” Trump said. “It has a good ring to it.”

The new agreement is hardly the radical reimagining of nafta that Trump had promised. The U.S.M.C.A. maintains nafta’s continental free-trade zone and most of its provisions, while offering some increased benefits to American workers. It requires, for example, that seventy-five per cent of a car’s components be made in Canada, the U.S., or Mexico in order for the car to qualify for zero tariffs. (It was 62.5 per cent under the old agreement.) Workers making at least sixteen dollars an hour must do forty per cent of the labor that goes into building the car (up from thirty per cent). Additionally, the new agreement imposes stricter labor requirements on Mexico, and may make it easier for workers there to organize (though it is unclear how enforceable these protections will be). Canada succeeded in one of its top priorities: saving Chapter 19, a provision that allows each country to challenge the others’ trade restrictions in front of a neutral body. But the Trump Administration was able to force Canada to reduce tariffs on some categories of dairy products, including milk powder and baby formula. As a columnist for the Canadian news magazine Maclean’s wrote, “When your big brother decides to shake you down for lunch money there’s really nothing you can do.”

There is little in the new agreement that is likely to trigger a surge in U.S.-based manufacturing, as Trump has suggested. Over all, the U.S.M.C.A. is essentially a revamped version of nafta, with improvements around the edges and new branding. In that regard, it is a classically Trumpian accomplishment: a relatively minor change that he will use to claim a sweeping victory. The business community welcomed the deal, while labor unions weren’t yet sure how to react—a sign that both groups are aware of Trump’s habit of promising to help workers while actually lavishing the greatest benefits on large corporations. The response from congressional Democrats was subdued, with some lawmakers cautiously applauding the new deal’s improvements, and others declining to take a position until they learned more details.

The idea for a free-trade agreement between the U.S. and Mexico was first floated, in 1990, in a public statement by President George H. W. Bush and Mexican President Carlos Salinas de Gortari. This marked the beginning of the slow process of international trade talks. Canada joined the negotiations the next year. The plan was immediately contentious. During the 1992 Presidential election, the Independent candidate Ross Perot argued that encouraging companies to nation-shop for the cheapest labor would lead to a “giant sucking sound” of jobs leaving America for Mexico. (Perot won a remarkable nineteen per cent of the popular vote.) Bush lost the election to Bill Clinton, and he hastily signed nafta in his lame-duck period. The timing was reportedly rushed to make it more difficult for Clinton—who had endorsed the idea of a trade pact but wanted greater protections for workers and the environment—to meddle with the treaty. Clinton ultimately embraced the pact, and free trade became one of a few issues on which mainstream Democrats and Republicans seemed aligned.

In 1999, during a series of World Trade Organization talks, in Seattle, the city’s streets exploded with anti-globalization protesters objecting to the emergent economic system embodied by the new W.T.O. and nafta. The protesters were concerned that lower wages and weaker worker protections in less wealthy countries would drag down those in the U.S., and that the flight of manufacturing jobs abroad would leave American communities gutted. They fretted that the pact would incentivize corporations to operate in countries with less stringent environmental regulations, accelerating the destruction of the planet. Most of all, they worried that the enormous benefits of the new system would primarily enrich large corporations and their shareholders, and harm those lower down the ladder, leading to greater economic inequality.

The so-called Battle of Seattle was widely criticized at the time—there were some notable eruptions of violence. But, in the end, many of the protesters’ predictions came true. Wages for American workers stagnated in the next two decades, while earners at the very top became exponentially richer. Stable, middle-class jobs declined and were replaced with less secure, lower-paid forms of employment—all while the cost of housing, education, and health care skyrocketed. The financial industry ballooned to occupy an outsized role in our economy, while the environmental crisis evolved into a catastrophe. Both major parties accepted these developments as the status quo, which relegated criticism of the new economic order to the political fringe. Incredibly, this allowed Trump to appropriate some of the language of the Seattle protests, and present himself as the voice for working-class resentment of economic inequality. And it has made it difficult for Democrats to challenge him, even as his new deal falls short of alleviating most of globalization’s harms.

There are still several crucial steps that the new nafta has to navigate before it becomes law. The leaders of all three countries must sign the deal, and then their legislatures must ratify it. If Democrats retake the House or the Senate in the midterm elections, the treaty would require bipartisan approval, which may prove to be a challenge in the current polarized environment. Nevertheless, Trump seems ready to claim a political triumph. Shortly after his Rose Garden photo op, he flew to Johnson City, Tennessee, to speak at a campaign rally for Marsha Blackburn, a Republican candidate for the Senate. The crowd was filled with adoring fans wearing red Make America Great Again hats. There were, reportedly, chants of “Build that wall,” and Trump assured his supporters that it was already happening. Then, from the stage, he proudly announced the new trade deal, and claimed that it was “the largest trade agreement” that the U.S. had ever made. The claim was false, but it didn’t matter. The crowd cheered anyway.