If you expected President Donald Trump to bring in an era of free trade, and not managed trade, then you will be disappointed. Or, if you thought NAFTA 2.0 would be more about free trade, and not more crony, government trade, then you will also be disappointed.
The second incarnation of NAFTA, otherwise known as the USMCA (United States, Mexico and Canada Agreement), is just more of the same with regulations shifted around, restrictions in different areas, and tariffs in others.
Markets are jubilant on the news, but not a libertarian free trader. That said, there are a couple of good things inside.
So, here are five things you should be aware of in the updated deal:
– The new deal will last 16 years, mandating a joint review for every six years, which does make sense considering the economy is always changing. Just think when NAFTA was first ratified: most people did not have a personal computer, the Internet wasn’t a thing, and China was just getting started on the economic warpath.
– U.S. farmers will have increase access to the supply-managed Canadian dairy market – 3.59 percent. This is upsetting Canadian unions because the industry has been protected for decades. With triple-digit tariffs on dairy, foreign competition is pretty much barred.
– 75 percent of the contents of any automobile imported into the U.S. must be manufactured in North America, up from 62.5 percent.
– Cross-border online shopping into the U.S. worth $150 or less will no longer be subjected to Canadian duties.
– The U.S. and Canada will maintain their tariffs on steel and aluminum.
All three sides are ecstatic.
President Donald Trump wrote in a tweet:
“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!
Congratulations to Mexico and Canada!”
The Prime Minister’s Office (PMO) said in a statement.
“The Prime Minister and President stressed that the agreement would bring the countries closer together, create jobs and grow the middle class, enhance North American competitiveness, and provide stability, predictability, and prosperity to the region. The leaders agreed to keep in close touch and move the agreement forward.”
The best plan should have been to abolish NAFTA and replace it with nothing. That’s it.
On the flip side, any type of trade deal is better than no trade at all.
Too bad it’s an either/or case and not just unmitigated free trade.
–AM
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