At the White House on Monday, US President Donald Trump and his trade negotiators detailed the new United States Mexico Canada Agreement USMCA), a deal reached to replace Nafta, the North American Free Trade Agreement. Nafta has been in place since 1994 and set the three North American continent nations on a path to closer economic integration — but it was an agreement that, in Trump’s eyes, ceded too much to the neighbours to the south and north, and adversely impacted traditional US manufacturing jobs.
Throughout his campaign and since taking over the Oval Office, Trump had made it clear he considered Nafta flawed, and would work to bring a fairer and more equitable deal for Americans. Now that Trump has the USMCA, analysts are still parsing its clauses to determine what the long-term effects will be. Certainly, in the immediate term, USMCA does commit all three nations to continuing close economic integration yet it removes some of the stumbling blocks that had run counter to Trump’s instincts and commitment to making America great again. For starters, the USMCA is a deal the reflects the current 21st-century climate where e-commerce facilitates the instantaneous movement of electronic services, and it also covers off glaring loopholes that existed in Nafta over intellectual property rights. Certainly, given the way software corporations have evolved, USMCA is an improvement.
When introduced, Nafta proved a boon to the so-called “Big Three” automakers Ford, Chrysler and General Motors, allowing them to shift production of motor vehicles to plants in Mexico, where workers were paid daily wages equivalent to the hourly rates at most US-based plants, or to Ontario, just across the border from Detroit, Michigan — where the Big Three let Canadian taxpayers pick up the tab for higher health insurance, a cost they incurred in the US. Now, USMCA guarantees that any auto-manufacturing will have to be done in plants that guarantee a $16 hourly wage.
Nafta too failed to provide adequate access to Canada for American dairy farmers, with the Canadian dairy industry being able to access US markets, inflicting a serious hardship on the milk industry in US states bordering the 49th parallel. The USMCA resolves that imbalance. The new deal too offers a new resolution-solution process, one that removes the arbitration panels of Nafta and allows courts instead to decide on contentious issues. The downside of that, however, is trying to decide exactly which court and where has jurisdiction on matters of an international nature. Most of all, though, USMCA is a victory for Trump who has shown that he is determined to ensure international agreements are done his way. And his approach seems to work.
