A NAFTA deal brings a return to status quo

ON THE CAMPAIGN TRAIL, DONALD TRUMP’S take on free-trade deals was clear. He promised to withdraw the U.S. from the Trans- Paciic Partnership (TPP) and reserved special ire for the North American Free Trade Agreement (NAFTA), which he called “the worst trade deal ever.” And sure enough, he withdrew the U.S. from the TPP within days of taking oice last year, and on Sept. 30 his Administration announced that it had reached a deal with Canada and Mexico to replace NAFTA, which has governed trade between the U.S., Canada and Mexico since 1994, with a new pact called the U.S.-Mexico- Canada Agreement, or USMCA.

“I promised to renegotiate NAFTA,” Trump said in the White House Rose Garden the day after the announcement. “Today, we have kept that promise.” But despite Trump’s rhetoric, the new agreement keeps the framework of NAFTA largely intact, maintaining the status quo of free trade between the three countries. In fact, some of the changes actually look a lot like elements from the TPP, which was negotiated under President Barack Obama.

The news that most North American trade can continue smoothly is a huge relief to a slew of industries and interest groups that were rattled by Trump’s repeated attacks on NAFTA— as well as to governments in Mexico City and Ottawa, along with Republicans and Democrats on Capitol Hill who support free trade.“Free and fair trade in North America . . . is in a much more stable place than it was yesterday,” said Canadian Prime Minister Justin Trudeau at a press conference. “NAFTA will be preserved, updated, modernized and stabilized.”

By resolving tensions over NAFTA, Trump is putting out a ire that he initiated. After his remarks on the campaign trail, fear lingered that he might leave the pact. As recently as Sept. 26, the Trump Administration signaled that it might sign a bilateral trade deal with Mexico that would leave Canada out of the equation. “Canada has a long way to go,” Trump said at a press conference. “We’re not getting along at all with their negotiators.” At stake was more than $1 trillion in annual trade that occurs among the three countries. Manufacturers rely on the cross-border supply chains that have grown over the past two decades. Farmers have developed export markets in Canada and Mexico. And consumers have beneited from reduced prices.

And so interest groups and diplomats worked behind the scenes in a last-minute blitz to secure a trilateral deal ahead of an end-of-September deadline to reveal text. Ultimately, many say, a three-party deal is a win no matter the details.“The fact that we have an agreement at all is a plus,” says Richard Kauzlarich, a former U.S. ambassador and a professor at George Mason University. But he adds, “I don’t see any revolutionary change.”

YOU WON’T HEAR that from Trump, however. In announcing the new agreement, the President called the USMCA a “much diferent deal” from NAFTA and continued to insist that the old agreement had killed millions of jobs. (Economists say it’s not so simple.) And while the USMCA keeps the heart of NAFTA in place, it’s not exactly the same. Automakers looking to avoid duties on vehicle imports will need to use a higher percentage of North American auto parts and pay some workers more, a provision designed to make U.S. labor more competitive. American dairy farmers will get additional access to the Canadian market. And the deal will need to be reviewed and renewed before a 16-year period ends, a major concession to Trump’s general skepticism toward such deals.

Broadly, the deal was a political win for Trump, adding a concrete pact to a trade policy that has generated more uncertainty than clear economic gain. And while the USMCA is limited to three countries, the Administration quickly sought to portray it as a step toward tackling trade tensions with China. The U.S. has imposed tarifs on more than $250 billion in Chinese goods, the efects of which have already roiled farmers, manufacturers and other businesses. U.S. Trade Representative Robert Lighthizer suggested that the USMCA deal could be a “template” for future trade agreements, and Larry Kudlow, Trump’s chief economic adviser, said it “sends a signal to China” about trade principles in North America.

Yet trade experts remain skeptical that the agreement means the U.S. is any closer to resolving its issues with China. The existence of 25-year-old NAFTA text that largely satisied most parties gave negotiators a solid starting place, but no such common ground exists for the U.S. relationship with China. And while democratic pressures in all three North American countries kept them working for a speedy resolution, leaders in China are girding for a long and drawn-out conlict that might include some short-term economic losses they’re willing to take.

No matter what his advisers may say to calm concerns, Trump at least seems prepared for the long haul. “Hopefully, we can make a great deal with China,” Trump said. “And if we’re unable to make a fair deal, then we’ll use tarifs.”

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