Mexico-Canada trade deal is not perfect for USA but deserves to pass

December 17, 2019 0 By HearthstoneYarns

While President Donald Trump is about to be impeached in the House, an oddly discordant chorus of bipartisanship has broken out. This is most notable on trade, where Democrats and the White House have an agreement on a NAFTA 2.0, to be rebranded as the United States-Mexico-Canada Agreement.

There are many ways to pick apart the USMCA, which, barring last minute snags, is scheduled for a House vote as early as Thursday.

One is with the simple observation that the USMCA keeps most of what was in NAFTA. If that trade agreement — which took effect in 1994 — was “the worst,” ever according to Trump, and widely panned by Democrats and labor unions, why is a modest update such a grand thing?

Trade deal protects autoworkers

This agreement also singles out autoworkers for special protection. To qualify for zero tariffs, cars that cross the border under terms of the USMCA would have to be 75% made in North America, up from 62.5% in NAFTA. Starting next year, 30% of production would have to be done by workers earning an average wage of at least $16 an hour. By 2023, that percentage would rise to 40%. This would make cars modestly more expensive for consumers, add more bureaucracy and make North American automakers somewhat less nimble and competitive.

OPPOSING VIEW: USMCA does not deliver on what the moment demands

Still another critique is that the bipartisanship here seems to be for all the wrong reasons. Trump wants something to claim as an accomplishment; Democrats want to show they are not just about impeachment. Both parties are obsessed with a few industrial states that could turn the 2020 election.

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Looking at the big picture, however, months of good-faith negotiating between the White House and House Democrats is behavior that should be reinforced. There are very few things the two sides can agree on. When they find one, they should be encouraged.

What USMCA improves

And while this measure has some things not to like, it has others that are worthy. The USMCA would do away with a back-channel dispute resolution mechanism that corporations have used to demand concessions from the member governments. And the pact includes significant provisions on e-commerce, which was in its infancy when NAFTA was passed, as well as protections for U.S. copyright holders.

The simple truth is that NAFTA has been a success, so a modest update is not a bad thing. Critics point to job losses in manufacturing since it went into effect. But most of the losses were from technological change or trade with countries like China.

Shortly after NAFTA’s passage, the United States produced about $3.9 trillion a year in manufactured goods. In 2018, that number was up to $6.2 trillion. The problem for employment is that both new and existing manufacturing industries are much more automated than was the case 25 years ago.

NAFTA critics also fail to see its positives. Numerous industries, including some in manufacturing, have seen an increase in exports. The pact might have mitigated some of the trade-related losses as well. If a factory moves to Mexico or Canada, it is much more likely to order parts from the United States than if it moved to China or Pakistan.

NAFTA did need some changes and updates. While not perfect, and leaving out some crucial areas like climate change, the USMCA is worth passing.

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This article originally appeared on USA TODAY: Mexico, Canada trade deal: USMCA not perfect but deserves to pass