A Brand New Deal or NAFTA 2.0: What are the realities of the USMCA for North America?

BY ELLIE LONGMAN-ROOD, North America Editor

While British politics is consumed by the deal surrounding our exit from the European Union, it is easy to forget that there has been another international deal at stake. For the past year, negotiations have been underway to modernise NAFTA. This all arose from Trump’s campaign promise where he pledged to address the “worst trade deal in history”. So, when the 2016 election made Trump President, it meant that NAFTA was going be reassessed. The negotiations were long and arduous. More often than not, little was being achieved. All the while, the stakes remained incredibly high as neither side wanted to appear weak in the face of the other. However, few expected the result we were left with. After months of going backwards and forwards in talks, NAFTA was left behind in the past and we emerged with a renamed deal; the United States-Mexico-Canada Agreement. Ironically, Trump has fulfilled his electoral promises to the public which is usually an element politicians are criticised for. Yet, in this case, concerns have surrounded the fact that Trump is doing exactly what he stated he would.

With this change, it is essential to ask what the creation of the USMCA means for global affairs and trade. Commenters have taken to calling the deal NAFTA 2.0. This comes from claims that in reality, once the dust has settled there will be very little change to North American trade. This, however, is too idealistic as there are some changes that have arrived with the creation of the USMCA that are hard to deny. To start, it has introduced new rules on how to make a North American car. Effectively reducing trade in automobiles. Trump demanded a new approach to how automakers in Mexico and Canada must make cars and trucks. A new approach that was added to an already complex section that existed in NAFTA. Alongside further regulation, USMCA now demanded a higher percentage of parts be sourced in North America, regardless of how this affects cost. Considering Trump positioned himself as the businessman for the people, this strategy is alarming. It also set limits on Canadian dairy exports. Dairy has been a hot topic for the negotiations, and for good reason. It is essential for Canada that this sector is looked after. In 2016, it accounted for $253.3 million exports alone and historically, it has always been the industry that politicians seek to please. The USMCA enforces export taxes if global exports reach a certain size, that discourages global trade. This adjustment to the deal means that Canadian dairy will likely be worse off. Arguably, the most significant demand of the USMCA is the restriction of trade with China. This new agreement means that Canada must give 3 months notice to Trump before engaging in trade with China. If it appears that an agreement may be met between Canada and China, Trump holds the right to terminate the USMCA within 6 months. All this puts Trump alarmingly in control of this vital and global issue.

As the colloquial phrase suggests it is not the destination that is of importance, but the journey. Obviously, we cannot take this literally, as the outcome of the negotiations is still highly significant. However, it is paramount to assess how the talks played out. To essentially identify who has been in control. It is still uncertain what the USMCA’s implications will be. One thing, however, has appeared clear from this process; the United States still holds the cards when deciding North American trade. In fact, the very term ‘negotiations’ seems incredibly generous. The pattern of the negotiations played out in that Canada’s key players, such as Minister of Foreign Affairs Christina Freeland, would approach meetings with demands and ideas, only to have them rejected. After a few times of this occurring expectations began to lower. In fact, some have commented that it is a miracle there was an agreement reached at all.

America, and more importantly Trump’s role in the negotiations, have made one thing clear. Despite a call for social upheaval in the states caused by the movements such as Times Up and Me Too, globally its image power is going to be incredibly hard to remove. Whether this is the desired outcome or not, the viewpoint of the US in global politics is still significant. Recent academia has toyed with the idea of the BRICS countries rising in status and even reaching a point where they can challenge the hegemony of the US. These countries, such as India, have indeed grown at larger than usual rates. Yet, this theory still has a long way to go. Especially when we look at the reaction to Trump’s state trips last year. In Vietnam last year, less than 50 years after the end of the horrors the Vietnam War brought, a poll showed that during his trip 58% of the nation had confidence in Trump’s ability to steer international affairs. To some nations, the shining beacon of the American Dream has not yet been distinguished.

President Trump waltzed into these negations assuming he was invincible. This is an image he has not emerged with. Academics and economists are calling his approach and rhetoric unprofessional and disrespectful. Earlier this year Trump stood up and exclaimed: “trade wars are good and easy to win”. While it is certain that some on Pennsylvania Avenue will claim the USMCA to be a win for the US. This language, however, remains unforgivable. Free Trade is extremely beneficial to all involved. This is hard to dispute. For the leader of the free world to stand up and boastfully claim that disagreements surrounding it are convenient, as America can simply emerge out on top truly leaves one lost for words. The USMCA is not solely about an international trade deal, but has real knock-on effects to citizen’s lives and employment. A factor that appears to have escaped the thinking of the Oval Office. In global politics, no event exists in isolation. Trade is no exception to this. The coming months, and indeed years, will be incredibly revealing as to how this deal will shape and define international trade in the future. As the U.K has been realising with Brexit, it is extremely difficult trying to predict the outcomes of an international agreement. Especially, when it is unlike one the country has witnessed before. What history has taught us is that trade needs to be open in order to thrive. Unfortunately, the USMCA, in reality, is the opposite of this.

 

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s