THE NEW “NAFTA” WILL NOT DO WHAT IS PROMISED

…US Trade Representative Robert Lighthizer who led the USMCA negotiations

Trump doesn’t understand how trade works.

It is important to understand how our president thinks.  For instance, understanding the difference between the making of the worst deal ever, and the making of an incredible, spectacular, amazing deal.  With Mr. Trump it is so obvious.  For the president, terrible deals are those negotiated by people other than Donald Trump, while fantastic deals are those negotiated, or at least approved, by Donald Trump.

Therefore NAFTA was terrible, while the new NAFTA, (under a different name), which is not all that different from the old NAFTA, but because it’s approved by Donald J. Trump, it’s fantastic!

Let’s face it.  For the man that considers himself the world’s greatest deal-maker, this same dealer almost went two full years without making any deals on anything.

Oh, he has walked away from deals like the Iran nuclear deal, and the Paris Climate deal, and the Trans-Pacific Partnership (TPP), but up until this deal with minor changes, there was nothing.

That includes no trade deals, military cooperation deals, conflict resolution deals, and especially no domestic legislation, except a tax cut that was mostly done without his involvement.

However, he did things in those two years that caused the rest of the world to see our president as dishonest, unreliable, and someone whom they can’t trust to keep his word.

Last week, Trump did sign minor tweaks to a trade deal with South Korea.  Those tweaks may, or may not, result in more American cars being sold in South Korea.  As expected, Trump had called the original version “a horrible deal.”  Then he hailed the new agreement saying, “It’s great for South Korea. It’s great for the United States. It’s great for both.”

That same approach is being used with the new NAFTA, officially called the United States-Mexico-Canada Agreement, or USMCA, unfortunately, that new name would be pronounced “Uh-sum-cuh” which doesn’t exactly roll off the tongue. The North American Free Trade Agreement, Trump had often said, was “the worst deal in history”.  But with just a few of changes, and of course, Trump’s approval, it’s now being trumpeted as the greatest thing since the sliced bread.

So here are some highlights of the changes:

·       Autos: In order to qualify for zero tariffs, autos will have to have more of the manufacturing done by higher-paid workers. (This is good for the workers, but the cars will cost more.)

·       Dairy: Canada will now accept more American milk and dairy products.

·       Copyright: Canada will extend the term of copyright from 50 years after the copyright holder’s death to 70 years, as the United States demanded.

·       Drug patents: At US urging, Canada will offer enhanced patent protection for drugs, which will make them more expensive which increase profits for the drug industry.  (GREAT!)

·       Dispute resolution: A NAFTA provision allowing investors to challenge the decisions of governments has been eliminated, while another provision providing for disputes among the three countries will be settled by a panel of representatives from all three, this has been retained.

·       And of course it has a new name!

For some Americans, these changes could be significant.  You know, if you’re a dairy farmer in the mid-west that is eager to get their milk into the cereal bowls of Canadian consumers.  But on the scale of these three nations, it’s all pretty minor.  It certainly isn’t going to have Trump’s enormous, “so-much-winning-we’ll-get-tired-of-winning” effect on the American economy.

But it is what we should have expected. Along with immigration, trade was one of the few issues Trump seemed to actually care about.  Long before he became a politician, he had railed about how the, “United States was getting screwed by other countries, which are far more shrewd than we are, and they are all laughing at us.”

Trump has had an obsession about the US being laughed at.

But Trump doesn’t even understand how trade works.

Trump seems to think that when American consumers buy goods from China or Canada or Germany, the money simply disappears and the consumers hasn’t gotten the goods they purchased….?

At the event celebrating this new agreement, Trump said, “It’s a privilege for other countries to come in and attack the piggy bank,” by which he meant “Americans buying foreign goods”, which is not exactly other countries stealing our money.

Trump has almost never been specific about what it was in the NAFTA agreement he objected to.  Instead, he’d use it as way of talking about the decline of American manufacturing jobs, and the broader decline of high-wage, good-benefit, secure jobs in general.  Because he is never interested in the details, he doesn’t understand the those big, broad trends started long before the  NAFTA agreement, and that trade deal only affected those trends marginally .

If Trump understood how trade works, he would have understood that changing or scrapping NAFTA would not bring back the labor market of the 1950’s and 1960’s.

Trump’s lack of understanding was born totally out of ignorance, because for Trump it meant he could negotiate a new trade agreement and declare victory, no matter what the new agreement actually contained.  Which he is exactly what he is doing.

Using his favorite media for talking to his devout base, Trump Tweeted: “Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico. The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!”

Yeah, right…..

It is ridiculous for Trump to take a serious complex agreement such as NAFTA, make a few tweaks to it, change the name, and declare that you’ve actually created something entirely new.

But as some have observed, this is hardly the first time Trump has focused intently on what something is called, as though that were far more important than what it actually does.

Trump is so superficial and obsessed with his image, if you make some changes to NAFTA, but don’t change the name, then the result doesn’t give the sufficient credit to Trump.  If he could have called it TRUMPFTA, he would have, but short of that, USMCA will have to do.

But what it won’t do is transform the American economy in the way he has promised.

And that is no matter what you call it.

Copyright G. Ater  2018