Donald Trump

On NAFTA, Trump Averts the Danger He Created

Letting Trump conduct negotiations with foreign governments is like leaving teenagers unsupervised at home for a weekend.

|

It's an old theme of movies, TV dramas, and even cartoons: A nasty villain ties an innocent damsel to a railroad track, and her terror mounts as a train hurtles toward her—until at the last moment, a hero comes to the rescue. It's also a regular theme of the current administration. The twist is that the villain and the hero are the same person: Donald Trump.

The revised NAFTA, christened the United States-Mexico-Canada Agreement, is the product of his peculiar approach to disputes. First he heaps scorn on the status quo. Then he emits a torrent of demands and threats, some of which could be disastrous, generating anxiety and uncertainty. Finally, he extracts some modest changes, for better or worse, and invites the praise of a grateful nation. (In the case of North Korea, he then proceeds to fall in love with his negotiating partner, but that may be a one-time fancy.)

As a candidate, Trump reserved special disgust for NAFTA, which he called "the worst trade deal maybe ever." He vowed that he would withdraw if Mexico and Canada wouldn't accept major changes. As president, he repeated his threats, raising fears among automakers and other companies that their carefully constructed transnational supply chains would be tied in knots.

But last month, the administration reached an agreement with the Mexican government, allowing Trump to crow about his deal-making prowess. "A lot of people thought we'd never get here," he said. He also indicated that if the Canadians didn't want to accept the same terms, they were welcome to climb onto an Arctic iceberg and float away. The Oct. 1 deadline the U.S. imposed on Canada raised the prospect that the whole package could collapse, to the detriment of the entire North American economy.

Letting Trump conduct negotiations with foreign governments is like leaving teenagers unsupervised at home for a weekend. You don't expect to find the place in better condition when you return; you just hope it hasn't burned down. It came as a relief that Trump averted the disaster he had threatened to unleash.

The most important fact about the new version of NAFTA is that it would preserve more and destroy less than Trump led his followers to believe. But making a few changes and giving it a new name lets him strike a heroic pose.

Congress still has to decide whether to approve the agreement, but in general, it would preserve the North American free trade zone, with zero tariffs on the vast majority of goods crossing national borders. Companies would still be allowed to invest, operate, and shift production according to economic logic rather than government-created barriers. Special visas that allow professionals in dozens of different occupations to move from one country to another would be retained, despite Trump's notorious aversion to foreigners.

There are some actual upgrades, as Gary Hufbauer, an economist at the Peterson Institute for International Economics, notes. U.S. companies and individuals holding copyrights, trademarks, and patents would gain safeguards against piracy. Pharmaceutical companies that have to spend fortunes to prove the safety and efficacy of their medicines wouldn't have to worry about generic rivals reaping the rewards. Digital products would be shielded from taxation.

But most of what the administration got would impede commerce, restrict businesses, and harm consumers. By 2023, at least 40 percent of the components in every vehicle would have to be made by workers earning at least $16 an hour. The administration demanded that provision not to lift up Mexican factory workers, who generally make far less, but to force manufacturers to move production out of Mexico.

Republicans generally oppose minimum wage increases—which is what this mandate would amount to—but if the change were to cause layoffs in Mexico, the Trump administration would count it as an achievement. Hufbauer worries that the precedent will mean "Democrats will put minimum wages in every future trade agreement." It would, of course, raise the price of cars.

The deal would also weaken protections for U.S. businesses operating in many sectors of the Mexican economy, making them vulnerable to onerous regulations that diminish or destroy the value of their property. Why would the administration want to expose American firms to greater risk in Mexico? Simple: to discourage them from investing in Mexico.

Still, the outcome could have been much worse. In this case, it's good to see the damsel escape from the tracks before the train runs her over. And let's just forget who put her there.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

76 responses to “On NAFTA, Trump Averts the Danger He Created

  1. Yeah, but will he learn the lesson here? For a supposed deal maker, he sucks. “Making better deals” means bellowing and bluster,to Trump, beating the other guy, which will continue failing with sovereign nations. No more Win-Lose competition, Donald. Stay with Win-Win. This is America.

    1. Give it up Hihn.
      Chapman is just covering his ass here, because the “danger” he squawked about never actually existed.

      Why has Reason become such a pit of dishonest demagoguery and far-left water-carrying? Is it Gillespie’s fault? Who’s to blame?

      1. Reason’s boy, Jeff Flake supported USMCA.

      2. “I’m a liberal.”
        -Matt “Welchie Boy” Welch

  2. Trump and his supporters subscribe to a fallacy that, in any deal, there is a winner and loser. But that’s not what a deal is: it means both parties get what they want, or at least what they are willing to accept. (Unless the negotiation happens at gunpoint.)

    Trump’s detractors have their own pet fallacy, however. They believe the economic pie is one size. You taking a bigger piece means less is left for others. But it’s not that kind of pie.

    So many dumb people on each side. It’s depressing.

    1. Not all people who support Trump’s plan to get lower trade restrictions think the economy is a one size pie or zero-sum game.

      Even with these lower overall trade restrictions there are parts of the new deal that add trade restrictions.

      We have more managed trade instead of free trade.

      1. This.

        The plain truth is that nobody outside of a tiny handful of people truly wants or believes in 100% free trade.

        What the 99% want is to game the system in their favor.

        1. I would just like to see trade deals not stacked so much against American business. Apparently Trump agrees. I hope he can continue to improve things.

    2. “Trump and his supporters subscribe to a fallacy that, in any deal, there is a winner and loser.”hat’s bullshit.

      No. That’s bullshit. Trump supporters correctly understand that the US has been on the losing end of trade deals that should be re negotiated. Nothing says both sides can’t benefit, but a one sided deal, as we have with China, and the EU, is not acceptable.

  3. “On NAFTA, Trump Averts the Danger He Created.” That’s a funny way of saying you were wrong about Trump’s renegotiation of NAFTA being a disaster.

    1. So it was a small disaster rather than a bigger disaster that we free-traders feared the most. We ARE worse off than before! Autos will be more expensive, and iron and still still remain to be re-negotiated (may stay worse, as they are now).

      You call that a “win”?

      1. So it was a small disaster rather than a bigger disaster

        Yes, you should be happy that Trump didn’t burn the house down. Now praise him quickly! What is wrong with you?

        1. You are an anti American traitor PB. Your opinion is valueless.

    2. Seriously. Time and again for two years now Trump has proven that he’s not the reckless caricature we’re told. While his style is certainly different than what we’ve been conditioned to expect from politicians, it is nonetheless working and not causing war/financial catastrophe/internment camps/etc. Yet, we’re still supposed to assume that the caricature is correct for some reason.

      1. Closer to the truth to say that he is the reckless caricature as portrayed, but then, having no real principles, he quickly flip-flops and is a tad less reckless in some areas so that the overall damage is not as bad as it could have been. But, in most cases, we are still worse off than before.

        1. In what areas are we worse off than before? You could argue that we haven’t made real progress on North Korea, but was it better to have Kim overtly threatening to nuke our west coast? You could argue we haven’t made real progress on tax reform, but was it better when businesses and some brackets of individuals were paying higher taxes? You could argue that we still have a tremendous unaccountable regulatory state, but were we better off when it was bigger and had a few more regulations? Etc…

          I think you’re revealing more about your policy positions than you are about Trump’s character. To wit, he made campaign promises, and has generally tried to advance the ball in the direction of all of the promises he made. He mas not been successful in all of that, but I don’t know how you conclude he doesn’t have principles because he tries and runs into the political reality that there is an opposing party that he must often compromise with.

          1. In the case of this trade agreement Trump has introduced new regulations (75% origin) new taxes (2.5% labor tax) and simply renamed the rest of the agreement in order to claim victory.

          2. “but was it better to have Kim overtly threatening to nuke our west coast”
            Yes, obviously yes!!

  4. ” But making a few changes and giving it a new name lets him strike a heroic pose.”

    Yes, heroic enough to embolden the Trumpistadores and Trump fellators!

    1. The best part of historically low unemployment is Hillary is still unemployed.

  5. “The most important fact about the new version of NAFTA is that it would preserve more and destroy less than Trump led his followers to believe.”

    For anyone that has actually paid attention, this is how has always operated. It is not new. He makes a public declaration of an extreme position and then negotiates back slightly from that position to finalize an agreement that is still better than where he was before.

    1. Did you read the article? Worse than before. Just not as “worser” as it could have been.

      1. The article is an opinion. It’s the opinion of someone who has consistently predicted economic collapse the last 2 years. Krugman level predictions. Hint: I don’t think krugman is a good economist either.

  6. LOL, what a sour grapes article.

    1. Chapman decided that he didnt want to come out and say that Trump was still a poopy head.

      Chapman cannot ignore that Trump’s trade negotiation plan worked to get lower trade restrictions.

      1. plan worked to get lower trade restrictions

        You just write the opposite of what really happened, don’t you?

        1. If you were actually intellectually curious you would see economists are currently split on the new NAFTA deal.

      2. MAGA!

  7. Poor Chapman. Refuses to give credit to Trump for negotiating better trade terms between the USA and Canada and Mexico.

    Also Chapman will never admit that using everything in the American toolbox for trade negotiation can work, including tariffs.

    I hope this is just a stepping stone to getting us all to free trade but until then I will take short term tariff costs for long- term lower trade restrictions.

    1. If by “better” you mean it includes more protectionist language to enrich crony producers at the expense of consumers, then yes it is a better deal.

      If by “better” you mean closer to free trade than NAFTA, then you are either dishonest or mistaken.

      1. If by “better” you mean closer to free trade than NAFTA, then you are either dishonest or mistaken.

        LovesTrumpsTinyMushroomDick1789 is our resident idiot.

        1. Hey, sarc, lookit that–Shrike’s got your back.

          Shrike.

          Shrike, Tony, and Hihn. That’s where you’re sitting.

          1. broken clock…

            1. Maybe it’s your blindness due to a requirement for ideological purity on this matter. Many economists are applauding how much better and more equal this deal is.

              1. Again, it depends on what “better” means. If “better” means higher prices for consumers for the benefit of cronies, then yes it is indeed better.

                Trump and his supporters are not interested in free trade. They want it both ways. They want to sell without restrictions, but they want to shield domestic industry from foreign competition at the same time. Thing is, when cronies win, consumers lose.

                So if we’re talking about economists who focus on the seen, then yeah they’re going to applaud this deal.

                If we’re talking about economists who read Bastiat, then not so much.

            2. No Sarc, you’re just all in on being a NeverTrumper. For some reason it’s all about being against Trump no matter what.

              1. Yeah. Because if I oppose anything I oppose everything. Because I think he’s an ignoramus when it comes to trade, that means I am against his cutting regulation. Because I’m not a xenophobe, that means I oppose cutting taxes. Yeah. Sure.

                The only difference between you and those idiots who truly believed that opposition to Obamacare was rooted in racism is the party in power.

              2. Sarcasmic is an anarchist.

                He wants it to all burn, so he can get Anarchy-land.

                Any actions that brings about the downfall of the USA, are in Sarcasmic’s wheelhouse.

      2. ‘Better’ as in lower overall trade restrictions than NAFTA.

        NAFTA
        USMCA

    2. I like the false choice fallacy built in to these articles. Either Trump had to completely scrap NAFTA or he had to stick with the status quo.

      As usual, Trump has outwitted his detractors by proving that he could tweak the parts that caused problems without burning the world down. You could argue about whether the changes will actually work as intended, but you would think that he would get credit for trying to take a minimal approach instead of tearing the whole thing up and trying to start from zero.

    3. If I want to buy something from Juan instead of John, and you want to tax me for it, then fuck off slaver.

      1. You’re only supposed to be able to sell stuff to Juan. Not buy stuff. When you buy stuff from foreigners then you send them money, and that makes you poor. When you sell stuff to foreigners they give you money, and that makes you rich. Ideally you shouldn’t buy anything at all, and should simply hoard your money. Sleep on a park bench with a huge bank account. Then you’ll be rich! But if you buy stuff then you’ll be poor.

  8. “There are some actual upgrades…U.S. companies and individuals holding copyrights, trademarks, and patents would gain safeguards against piracy. Pharmaceutical companies that have to spend fortunes to prove the safety and efficacy of their medicines wouldn’t have to worry about generic rivals reaping the rewards. Digital products would be shielded from taxation.”

    Uh…a libertarian believes those are upgrades? The only one is taxing digital products. The others appear to be increase of patent/copywrite restrictions.

    1. Enforcement of existing patent laws is not an increase.

      1. Not only that, but since when is allowing piracy of intellectual property a libertarian position? I wasn’t aware that piracy is a free market principle, but if so, maybe I’m anti-free market myself.

          1. Thanks for the link. Unfortunately it will take more time than I have at the moment to read it and it seems interesting. But I disagree with what I read so far, and I note that this is a “dispute” among libertarians, not a universally accepted idea. So I’ll stand on my position that piracy is not a libertarian position.

            1. Oh, there is very little consensus among libertarians on most things.

            2. I think you’ll find that there’s no consensus among libertarians on just about anything. Why just a week or so ago there was a discussion on this very site about whether or not the NAP is universal, or if it only applies to certain people when we want it to. Because postmodernist deconstruction or something.

        1. There are arguments that many of the intellectual property right laws are misguided. That they raise costs and stifle innovation. They are, after all, federal regulations. The argument is that discovering something first is enough of an advantage to get market share and to allow the normal improvements to that product to more easily accrue to the original inventors without limiting competition. For example, if the FDA was not running amok making it very expensive to develop new drugs and bring them to market, then the companies would not need patents and extended patents to be profitable. And they could focus on further drug discovery and rivals could take those ideas and expand on them as well. So, more innovation, instead of having the patents limit competition and stifle innovation and keep drug costs sky high.

          1. Fair point, but we live in a world where the FDA probably isn’t going away. If that’s the case, I don;t have a problem with IP rights that compensate for the development costs.

            Though, IP is broader than prescription meds, and I don’t see this argument as a good fit for something like an author who spends years writing the century’s great novel and self publishes. If I own a big publishing house that can out distribute her for a cheaper cost, why should I be permitted to copy her book word for word and claim, “well this is just information”?

            That’s unjust, and it would work in favor of monopolies.

        2. It’s complicated. I would guess that most libertarians support intellectual property laws, but think they should be much less restrictive. i.e. 7 years after death of creator or something similar rather than (essentially) in perpetuity per Disney.

          The special case with IP law is that pirates don’t take something from somebody else, they make it harder for creators to profit off of their works. I’m not a 100% NAP follower, so I support some level of government enforcement of IP laws, but I’m wholeheartedly against perpetual IP rights. The cost to me as a citizen to enforce these rights after the creator has had sufficient time to profit from their work is unacceptable.

      2. Given how over the top most enforcement of IP gets, I’m not buying it.

        I have seen how these Trademark enforcements work in the past- some company comes into a market they never participated in, and shuts down a local business because they happen to have a similar name that they have used for years.

        With Piracy, I have no problem with protecting your digital works, but at the end of the day, most laws to protect against piracy just infringe the rights of people who are using the software/content legally.

        1. The company should have checked the state’s Secretary of State website for business names and not pick the same one as an older business has.

          You can also change your business name instead of closing up shop.

    2. God forbid that the prices of medicine go down due to more generics.

      1. God forbid that companies that make miracle remedies come into existence be rewarded for doing so and incentivized to continue doing so in the future.

        1. See my reply above. Of course they should be rewarded. But there is a way for that to happen naturally without limiting competition and innovation. I was surprised to discover that intellectual property was a real debate point among libertarians (about 10-15 years ago was when I first heard/read about it).

          1. Pharma is an area that perfectly highlights the problem. Absent some sort of protection for IP, you can’t be properly rewarded. The costs of creating a new treatment are astronomically high, and the cost of copying is unbelievably low.

            Many drugs are so cheap to synthesize, the packaging costs more than the drug. But finding, testing and getting that drug approved might cost billions. And if the target market is in the tens of thousands, that means that even amortized over 10 years, each customer would have to give them 100 bucks just for them to break even on research. And if a competitor can come in and sell the pills for 100 bucks a year, the creator cannot possibly ever recoup their costs, let alone turn a reasonable rate of return on the investment.

            In that word, the investment dries up pretty darned quickly.

  9. Trump cures cancer! Press declares cure racist, sexist!

    1. And Diane Feinstein has it on good authority the cure for cancer sexually assaulted some poor woman, some place in the US between 1980 and 1985. Crucify it!

  10. This is the first article on the deal where the phrase “minimum wage” has been written. Thank you. The so-called liberal press does not dare mention this blatant contradiction by Trump and the GOP. Of course, when they get back into the campaigns minimum wage laws will be bad because they raise costs but everyone will conveniently ignore that they just wrote it into UMSCTA.

    1. Make Mexican Labor Great Again!

      1. This is probably THE very worst part of the new agreement! (Min wage for Mexican auto workers). The Senate Democrat candidate in my state is all hot-to-trot to start dictating min wage in other nations, as part of “free” trade agreements, for example. Now that a GOP POTUS has blessed this kind of thing, this will NEVER change!!! Sky-high min wages in other nations, with no end in sight! (Or endless trade wars, one or the other).

        So if everyone makes super-high wages, all the prices will go super-high, and NOTHING has changed, other than that we get rampant, uncontrolled inflation, and old folks who have saved money, get screwed!!!

        1. Other than auto workers moving to Mexico. If you can get paid like an american but have mexican cost of living…. you’d be doing pretty darned well.

  11. it’s a better deal. how could an american be upset?

    1. It sucks. Quit drinking the Trump Koolaid. It isn’t even spiked.

    2. Buttplugger hates America.

      1. I doubt you even know how different the agreements are. Canada had already agreed to open 3.3% of its dairy market to 11 countries (including the US) under the TPP; Trump managed to up that to 3.6%. .3% must seem significant to you.

    3. For the most part it’s the same deal with a different name. But Trump’s uneducated base will believe whatever he tells them.

  12. Chapman again. ‘Nuff said.

    1. Chapman is a punch line to a bad joke.

  13. Dunno. Seems to me he done pretty good all things considered. Canada on the other hand, I’m not so sure.

    At best we got the status quo.

  14. “U.S. companies and individuals holding copyrights, trademarks, and patents would gain safeguards against piracy.” I guess that would apply to Canadian companies and individuals too, or don’t they count. Also, it’s more than “arguable” that many provisions of copyright, trademark, and patent law reflect successful rent-seeking on the commercial establishment, as Reason has often pointed out.

  15. Or as PJ O’Rourke said of Congress: trusting teenagers with whiskey and car keys…

  16. Yeah, because the PROFESSIONAL TRADE NEGOTIATORS have done such a bang-up job.

  17. “Pharmaceutical companies that have to spend fortunes to prove the safety and efficacy of their medicines wouldn’t have to worry about generic rivals reaping the rewards.”

    They spend “fortunes” on drug trials? It certainly isn’t spent on research, as most of that comes from the NIH and universities.

Please to post comments

Comments are closed.