Editorial: Canada, trade pacts, dairy and Trump’s histrionics
During an imagined press briefing of the recently revised North American Free Trade Agreement (Nafta) between Canada, Mexico and the U.S., Trump stood with Canadian Premier Trudeau at the podium, when a frenetic American reporter raised her hand to ask excitedly: “I hear it’s the best deal ever! Please tell me, do we get Trudeau?!”
Now, that would be a great deal, even if it were tagged with the phonetically challenged USMCA.
But, no, it didn’t happen. We don’t get Trudeau.
What happened was Trump took a wonderful relationship between two strong North American neighbors and caused a lot of bad blood. He threatened to scrap Nafta, a trade agreement in place for the past 24 years and one that has boosted trade between the U.S. and Canada to record levels, incorporated Mexico into the mix and created a three-way pact that has benefited American consumers significantly. While it has caused 500,000-750,000 lost American jobs (garnishing a lot of negative press from Fox and company), it has also created more than 5 million new jobs and Nafta created 800,000 new manufacturing jobs in the first four years (facts ignored by Fox and conservative media.)
Nafta also quadrupled trade between Canada, Mexico, and the United States, eliminated tariffs or taxes between the three countries, and trade jumped to $1.14 trillion by 2015. And, among other things, direct foreign investment more than tripled between the three countries. U.S. businesses invested $452 billion in Mexico and Canada, and companies in Mexico and Canada invested $240.2 billion in the United States.
Nafta wasn’t perfect. Along with the job losses here, the free trade agreement gave American agriculture huge advantages and forced a lot of Mexican farmers out of business — a lot of whom became migrant workers in the U.S. And while Nafta is good for the consumer in driving down prices of goods, it also depressed wages and arguably led to greater harm to the environment.
But putting the pros and cons of Nafta aside, it’s been Trump’s caustic approach that has made UMSCA so controversial.
For the past two years he has blasted Nafta with the same approach he uses to denigrate people — with falsehoods, lies, exaggerations, and bullying antics that belittle and malign. Trump’s playbook is well known: he creates the impression something is terrible, then creates an intolerable environment for it to exist, then backs off quietly, makes concessions and minor adjustments, and finally claims major success out of the near disaster he created.
In the new trade deal, which has yet to be ratified by Canada’s Parliament or the U.S. Congress, American dairy farmers would be able to sell slightly more milk into Canada, though details are still thin and the upside is unsure. As one Vermont farmer put it, American dairy farmers produce 220 billion pounds of milk annually, compared to just 20 billion pounds produced in Canada, noting that the Canadian market is so small it would be “lapped up” by America’s giant farms with barely more than a burp — and it’s unlikely the agreement would allow the U.S. to seriously threaten Canada’s dairy farms. In short, the full impact is unclear, but it’s unlikely to benefit American dairy farms significantly.
With automobiles, the new deal increases the portion of a car that needs to be produced in North America to 75 percent to avoid tariffs, up from 62.5 percent. It also requires at least 40 percent of that to come from factories where the average wage is $16/hour. While that’s a new provision for Nafta, and an improvement, similar progressive labor provisions were encompassed in the Pacific Trade agreement that President Obama had championed and passed, but Trump pulled out of during his first year in office; hardly ground-breaking initiatives.
Trump also tried to force a sunset clause that would kill Nafta after five years unless the countries agreed to extend it. Instead Trump compromised and extended it to 16-year term with a chance for a deal extension after six years — almost no change, at all.
In the aggregate, Trump negotiated minor concessions, gave up a few of his own, and wrecked long-established trust between the U.S. and Canada, as well as Mexico — a trust that will take a long time to rebuild.
And that’s just what has happened with our trade agreements between two of our neighbors — Mexico and Canada. The trade war with China and others continues to erode the faith and confidence in America as a trading partner, has hurt specific American businesses, and has made Trump the laughing stock of the world with his boastful claims of greatness.
Trade agreements will be modified and forgotten as time goes by, but what will be remembered are Trump’s histrionics; the damage done will linger for years.
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