What’s in a name? If you’re Donald Trump, pretty much everything. The White House Monday announced an “agreement in principle” with Canada to join a previously reached agreement between the United States and Mexico on a trade deal involving the three North American nations.
Trump praised the United States-Mexico-Canada-Agreement and described it as “historic.” He said he particularly liked the sound of the name — USMCA — he gave to the pact. A lot of business analysts were less effusive, calling it welcome, but more like NAFTA 2.0. Others, including members of the U.S. negotiating team that hammered out the deal, said it built on work that had already been done and was included in the Trans-Pacific Partnership.
The TPP, of course, was negotiated by President Barack Obama and pulling out of the 12-nation deal (which included Mexico and Canada) was one of Trump’s first acts as president. He also promised to renegotiate NAFTA, the deal which opened trade in North America but has been the source of political controversy for two decades. So, having reached agreement with Canada on the eve of a self-imposed deadline of midnight Sunday, Trump could claim to have delivered on one of his campaign promises — a redrawn NAFTA, with a new name.
But how much is new and was it worth the cost in damaged relationships with Mexico and Canada brought about by Trump’s imposition of tariffs as his primary negotiating tool? That tactic has soured U.S. relationships with European nations as well and has resulted in significant countermeasures by China, the primary target of Trump’s trade war.
Significantly, the USMCA includes “protections against misappropriation of trade secrets, including by state-owned enterprises.” Clearly aimed at China. Also, the pact discourages the partners from making free-trade deals with “non-market” countries. Again, China. These were lifted from the TPP.
The deal among the three countries does revise production standards on autos to make them exempt from border-crossing duties and sets higher salary requirements for auto workers, which could discourage some relocation of automakers to Mexico. It also opens more of the Canadian dairy market to U.S. farmers, but allows Canadians to buy more products online free of added taxes. Canada retained its right granted in NAFTA to independent resolution of trade disputes. New job creation is open to speculation.
While the president hailed the “new” deal and some Republican members of Congress were glad to have it to use on the campaign trail, that response was far from universal. As with all deals, the devil is in the details. They will be reviewed by Congress, which has to approve the agreement. Trump said he hopes to sign the deal in November, but he may be facing a new-look Congress, so that remains to be seen.
In the meantime, the USMCA has the positive effect of implying that there will still be a trade agreement among the three nations and the stock market welcomed that. Whether it was necessary to go through all the threats and recriminations to wind up with a lot of already negotiated items slightly tweaked and renamed is, well, it’s Donald Trump.