Trump Lost Ground on Trade With Mexico and Canada

Almost immediately upon taking office, Trump pulled out of the Transpacific Partnership (TPP) trade deal and vowed to re-negotiate NAFTA. Not long after that, Michael Grunwald wrote what I consider to be the definitive exploration of what that meant. He began with this:

…President Barack Obama’s negotiators spent more than three years haggling and battling to update and upgrade the 1994 [NAFTA] deal, and they eventually got a lot of what they wanted. Canada reluctantly agreed to give American farmers modest but unprecedented access to its tightly protected dairy industry; Mexico grudgingly agreed to labor reforms with more bite than NAFTA’s toothless union protections. The new deal opened up service sectors like insurance, accounting and express delivery where the United States tends to excel, along with e-commerce and other digital industries that didn’t exist when NAFTA was born. The United States also secured new restrictions on government-owned businesses, new protections for intellectual property and new safeguards for the environment.

The point was that the Obama administration didn’t get those concessions by re-negotiating NAFTA. Instead, they got them via TPP, which superseded the previous agreement with Mexico and Canada. What did they give up in return?

When I asked Obama’s trade representative, Michael Froman, what his negotiating team had given up to Mexico and Canada in exchange for their TPP concessions to America, he replied: “Nothing!” Mexico and Canada were willing to play ball because TPP would give them better access to sell their products in Asian markets—and when Trump tries to renegotiate NAFTA, he won’t be able to offer that carrot now that he’s ditched TPP.

As the president takes a victory lap today claiming credit for a re-negotiated NAFTA, now called the United States-Mexico-Canada Agreement, or USMCA, it is important to keep the whole context in mind. Here is Alan Rappeport’s summary in the New York Times of what the Trump administration got out of this new agreement:

■ International settlement dispute: A system that allows Nafta countries to rely on an independent body to resolve disputes will remain intact. Canada had insisted on keeping this provision, known as Chapter 19.

■ Dairy: The United States will be allowed to increase dairy exports into Canada, a win for Mr. Trump, who had insisted on greater access for United States dairy farmers.

■ Autos: Requires a higher percentage of a car to be manufactured in North America to qualify for zero tariffs. For the first time, the deal requires that a percentage of any vehicle that qualifies for zero tariffs must be manufactured in a factory where the average production wage is at least $16 an hour.

■ Tariffs — Steel and aluminum tariffs remain in place on Canada and Mexico, pending further negotiations. Canada and Mexico secure at least a partial exemption from any potential future American tariffs on automobiles.

We’ll have to leave it to trade experts and economists to line those benefits up in comparison to what the Obama administration had negotiated, but to a casual observer, it appears obvious that the United States actually lost ground compared to where we’d be under TPP. Nonetheless, Rappaport writes that “the deal represents a win for President Trump.”

Others are suggesting that Trump won small improvements. For example, Jeet Heer writes that “the changes are mostly cosmetic in nature in terms of the impact on Canadian/American trade” and Paul Waldman summed it up with this:

For some people, these changes could be significant — like if you’re a dairy farmer outside Grand Forks eager to get your milk into the cereal bowls of Winnipeg consumers — but on the scale of the three nations, it seems pretty minor. It certainly isn’t going to have some kind of enormous, so-much-winning-we’ll-get-tired-of-winning effect on the American economy.

That is all true if you compare the new USMCA to NAFTA. But it is not true if you compare it to the improvements that had been negotiated via TPP.

I am once again reminded of the Trump pattern Brendan Nyhan identified when the administration was celebrating non-existent improvements to our trade agreements with the European Union.

1. Present distorted version of the status quo
2. Create crisis over distorted version of the status quo
3. Restore status quo (often at substantial cost)
4. Take credit for status quo

I am sure that Trump’s enablers will join with him in celebrating this new trade agreement with Mexico and Canada. What almost no one will tell you is that this country could have moved much farther ahead on trade if we had stuck with the progress that was incorporated into TPP.

Nancy LeTourneau

Nancy LeTourneau is a contributing writer for the Washington Monthly.