NAFTA

Moooving on From NAFTA

A better deal on dairy with Canada, but at what cost?

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One of the few liberalizing policies contained in the Trump administration's rewrite of the North American Free Trade Agreement (NAFTA) amounts to little more than "a drop in the milk bucket," according to one new analysis, while other measures will significantly limit free trade.

Allowing American dairy farmers to export more of their goods to Canada, tariff-free, was a major goal for President Donald Trump in his yearlong effort to replace NAFTA with the United States-Mexico-Canada Agreement (USMCA). The president has often harped on Canada's dairy protectionism, citing it as a problem with the trade compact he famously described as "one of the worst deals" during his campaign for the White House.

It was a rare instance in which Trump—who has described himself on Twitter as "Tariff Man"—took the side of free trade. In announcing the terms of the USMCA in October, the Office of the United States Trade Representative called the lowering of Canadian tariffs on American milk, cheese, and butter a "key accomplishment" of the negotiations.

It remains to be seen whether Congress will approve the USMCA in its current form. The governments of Canada and Mexico must also OK the deal before it becomes official. While the dairy provision is a victory for free trade, Congress should weigh its impact against the USMCA overall.

Under NAFTA, U.S. exports to Canada accounted for about 3 percent of total Canadian dairy sales. A complex system of quotas and massive tariffs—some as high as 300 percent—kicked in at different thresholds, depending on the product. According to researchers at the Brookings Institution, the USMCA will allow American dairy products to reach a whopping 3.59 percent of total Canadian dairy sales before tariffs and quotas kick in.

This is undeniably a step in the right direction. But it's a very small one, potentially boosting U.S. dairy revenues by just 0.2 percent.

"The new agreement is a tweak, not a major reform," write Roger Knoll and Robert Litan, the authors of the Brookings analysis. "The benefits from the agreement for Wisconsin dairy farmers will be a drop in the milk bucket, lost in the annual variation in sales and production of milk products."

Measured against other aspects of the USMCA—such as new requirements for automobile manufacturers that will likely increase costs, limitations on how USMCA signatories can negotiate trade deals with other nations, and a sunset clause that would see the USMCA potentially expire in just five years—the promise of slightly freer trade for milk and butter doesn't appear to be worth the cost of the whole cow.

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33 responses to “Moooving on From NAFTA

  1. “Measured against other aspects of the USMCA?such as new requirements for automobile manufacturers that will likely increase costs, limitations on how USMCA signatories can negotiate trade deals with other nations, and a sunset clause that would see the USMCA potentially expire in just five years”

    I’d like to better understand the alternatives.

    If the U.S. senate refuses to ratify USMCA, do we defer back to NAFTA or is it like a no-deal Brexit?

    Sad as it may be, the USMCA is still probably better than no deal at all.

    If the default after a USMCA failure in the senate is NAFTA, then I’ll oppose USMCA entirely.

    More free trade is better. That’s the general rule.

    1. If this really is the text of USMCA (that it actually doesn’t remove milk tariffs, just moves the threshold up a percent) then I don’t see how anyone can defend it on free market principals.

      Which is why you have seen many in these comments, over the last few months, deriding Free Market principals. Sure, people have claimed that Trump is using tariffs to force open markets, but USMCA just proves that Trump is trying to protect select American workers (at the cost of other working Americans).

      It isn’t that “We are all socialists now”, it is that “We are all populists now”. There are plenty of leftist socialists, and they use populism to put wind in their sails, but among both sides of the aisle, there is a deliberate attempt to pay off voters with seen benefits while hand waving past the unseen costs.

      It is very reminiscent of the rise of the Gracchi Brothers in the Roman republic.

      1. There is no such thing as true “free trade” and there never has been either, because almost nobody in the world truly believes in it.

        What the overwhelming majority of human beings actually DO believe in is trying to game the system to their benefit. This is what our “friends”, “allies”, and “partners” have been doing to us for decades, and Trump is saying “OK, screw you guys, if you’re going to do this to us, we’re going to do the same thing back at you.”

        Doing what most prior presidents did, simply surrendering and giving the other countries everything they want no matter how unfair or bad the deal might be isn’t honest-to-goodness free trade, no matter how much dipshits like “sarcasmic” and the lying con artists of Reason might want to pretend it is.

        1. No, Trump is saying “Wow, Mexico is making shit cheaper than the US? Screw that, I’m going to make things more expensive here in the US, and all you Americans can pay more for it.”

          Trump has started a trade war with China to protect certain manufacturers, at the cost of many in our Agricultural industries, and the people who rely on cheaper goods such as steel. He isn’t “Sticking it” to other countries, he is forcing a bunch of American buyers and sellers to suffer for a couple preferred Americans.

          If USMCA really only gets a 1% increase in Tariff limits, then it is one big message to China. That message is “I’m Trump, and I am doing this all for show. All you need to do is sign basically the same treaty with a little tweak, and I’ll claim victory. Don’t worry, I have a bunch of sycophants who will carry my water through this whole charade.”

        2. In the wake of the Soviet Union falling and China abandoning communism, there was a tremendous amount of support for free trade on a principled basis. Plenty of countries did, in fact, open their markets to imports that wouldn’t have done so otherwise, and the world economy generally and the U.S. economy, in particular, has benefited greatly from both NAFTA and GATT.

          There has never been true justice in the world, but committing ourselves to taking advantage of all the justice we can get is hardly a principle we should abandon–certainly not because there’s never been true justice in the world.

          The fact is that the more justice we get, the better things will be, and it’s the same thing with free trade. We take advantage of agreements that will open trade up as much as possible. Meanwhile, free trade continues to benefit all the economies that participate–even if some politically connected groups manage to maintain various forms of protection. Certainly, the way to even more free trade than we have now is not to shield the world and its economies from the benefits of what free trade we have now. It’s to expand on the benefits people are enjoying and continue to bush for ever more barriers to come down.

      2. “If this really is the text of USMCA (that it actually doesn’t remove milk tariffs, just moves the threshold up a percent) then I don’t see how anyone can defend it on free market principals”

        If the available alternative to communism is crony capitalism, then I’ll choose crony capitalism because it’s more capitalist than communism.

        I’m certainly not defending the lesser of two evils as good–not just because I prefer the lesser evil.

        That’s why I’m trying to understand the alternative to USMCA.

        If the alternative to USMCA is NAFTA, then NAFTA is the clear winner.

        If the alternative to USMCA is a complete exit from NAFTA, then then USMCA may be the lesser evil–even if it’s evil. I’m not about to pretend it isn’t an evil, but I’m not about to pretend that it isn’t better than a complete abandonment of free trade either.

        1. I’m certainly not defending the lesser of two evils as good–not just because I prefer the lesser evil.

          No I totally agree with you. I was pointing out that many pro-trumpers were in here over the last months defending Trump’s derision of NAFTA by saying “It’s not free trade! Trump is using tariffs to negotiate free-er trade!” If USMCA is really written as has been reported, with a small increase in dairy exports, while adding a bunch of restrictions on manufacturing, then it puts the lie to those claims.

    2. If we don’t ratify USMCA then NAFTA will remain in force, but if USMCA is not approved Trump will push for a withdrawal from NAFTA anyway, a la “no deal” Brexit

      1. See, that’s what I thought, and if that’s the case, and the Democrats are likely to support an end of NAFTA, then my “support” for USMCA is entirely contingent on the likelihood of Trump going full retard and exiting NAFTA.

        If Trump has the power to unilaterally exit NAFTA, the free trade move now is to get congress to close that loophole. Maybe the Democrats will support that for the same reason they’d rather close the government down than spend $5 billion on a wall for Trump. They’ll do almost anything to oppose Trump because he’s Trump and they don’t want to give him any kind of victory.

        I wouldn’t trust the Democrats to save NAFTA for the sake of free trade. They’ve been looking for a way to get back in the hearts of blue collar, rust belt voters since November of 2016. So, the time to head off the president on a NAFTA exit is before a NAFTA vote comes to the senate.

        P.S. Some of you may be inclined to support a Brexit like withdrawal from NAFTA for the same reasons you’d support Brexit. The issues are different. Brexit is about immigration, environmental, and other regulations being set in Brussels rather than the U.K. That’s NOT what we’re talking about with NAFTA. Abandoning NAFTA would have all the negative economic consequences of Brexit with little or no upside in terms of autonomy, sovereignty, and democracy.

  2. Hooray for the free market!

    In Cobleskill, farmer John Radliff, who milks 40 cows, said a government program really can’t fix the problem.

    “If Sen. Gillibrand, the [U.S. Department of Agriculture] and this administration and any administration would stick the heck out of agriculture, it’s the best thing they could do,” he said. “I’ve been milking cows for 45 years, and I have seen so many programs come and go. They can’t fix it.”

    He said farmers need to stop expanding their herds when prices are high, and farms should be allowed to fail in accordance with free-market principles, the same as any other business.

    “We will just repeat our past mistakes,” Radliff said. “When times are good, it’s ‘Government stay out of our business,’ and when times are bad, it’s “Come help me.’ You can’t have it both ways.”

    I don’t know why those damn belligerent Canucks object to heavily-subsidized American farmers dumping their excess production on the Canadian market, you don’t see the US imposing tariffs on imports from countries that subsidize over-production of goods, do you?

    1. The belligerent Canook dairy farmers enjoy their heavily subsidized life-style and don’t want none of that cheep Yankee maloko harshing their mellow.

  3. Nice to see a rational criticism of whether Trump’s trade policy will be effective over the purple prose hysterics.

  4. It was a rare instance in which Trump?who has described himself on Twitter as “Tariff Man”?took the side of free trade.

    I am surprised how so many people still think these kinds of outcomes are due to luck or random occurrence. Are you that blind to Trump’s negotiation techniques this far into his presidency? Did you not know tariffs were just a blunt instrument he wielded to free up the markets (or at least make them a bit free-er and fairer?)

    1. Do you not understand that, if this is really the case, that Trump’s negotiation has failed miserably at that? A bunch of new managed trade to get Tariff limits lifted from 2% to 3%? The whole point of this article is that one example of Free-er trade is offset by the fact that auto manufacturing will get more expensive due to LESS free trade in that industry.

      No, Trump is not interested in Free-er trade at all. He is interested in protectionist policies that benefit a minority of Americans. You are right that he is using Tariffs as a club to get such concessions from trade partners. But not only is he punishing Americans with higher prices as a negotiation tactic, but the end goal of this negotiation is less free trade.

      Nevertheless, I expect Trump apologists to be in here explaining how Free Trade is actually bad, and protectionism is way way better anyways- completely glossing over the fact that for months they were in here arguing that Trump’s whole strategy was to use Tariffs to get more free trade.

      1. Trump offered Free Trade to our trading partners and they refused.

        Trump is using tariffs to advance a radical free-trade agenda: Trump knows that most of our trading partners don’t really want free trade.

        In a little-noticed interview with Fox News’s Maria Bartiromo earlier this month, Trump revealed that during the G-7 summit he made a sweeping proposal. “I said, ‘I have an idea, everybody. I’ll guarantee you we’ll do it immediately. Nobody pay any more tax, everybody take down your barriers. No barriers, no tax. Everybody, are you all set?’ ? You know what happened? Everybody said, ‘Uh, can we get onto another subject?'” Trump offered to eliminate all trade barriers ? and his supposedly pro-free-trade allies passed. Right before his meeting with Juncker this week, he repeated the offer, tweeting, “The European Union is coming to Washington tomorrow to negotiate a deal on Trade. I have an idea for them. Both the U.S. and the E.U. drop all Tariffs, Barriers and Subsidies!”

        1. This was posted at about 11–it’s just after one now.

          And no response.

          There’s never a response to this.

          Trump actually did it. Offered full on free trade.

          And nobody said ‘sure. that’s what we’ve been waiting for!!’

          And the apologists–because that’s what they are–made excuses about why it couldn’t be done or why they knew that Trump REALLY didn’t mean it.

          But it happened, Trump put it out there publically.

          Refute it.

          1. Yup. Boehm and the other Reason staff writers hate that I keep bringing this up.

            That and the US economy has not imploded six months after Trump tariffs were implemented.

            1. “Yup. Boehm and the other Reason staff writers hate that I keep bringing this up.”

              Delusions of grandeur.

              A+

          2. Hey, refute this, Nazi troll bitches!

            From PoliticoEU:

            Trump rejects EU offer to scrap car tariffs

            By MAXIME SCHLEE 8/31/18, 9:23 AM CET Updated 9/1/18, 11:30 AM CET
            U.S. President Donald Trump said the EU’s offer to scrap tariffs on cars is “not good enough” because European consumers’ “habits are to buy their cars, not to buy our cars.”

            In an interview with Bloomberg published Friday, Trump also said the EU “is almost as bad as China, just smaller.”

            On Thursday, EU trade chief Cecilia Malmstr?m told European Parliament’s trade committee that Brussels is willing to scrap tariffs on all industrial products, including cars, in its trade talks with the United States.

            “We are willing to bring down even our car tariffs down to zero ? if the U.S. does the same,” she said, adding that “it would be good for us economically, and for them.”

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  7. One of the few liberalizing policies contained in the Trump administration’s rewrite of the North American Free Trade Agreement (NAFTA) amounts to little more than “a drop in the milk bucket,” according to one new analysis, while other measures will significantly limit free trade.

    Poor Boehm. He cannot even find citations anymore that support his nonsense positions.
    NAFTA

    USMCA

    1. You can actually check the text of both. The USMCA agreement has 3 pages of tariffs alone describing what duties the US will impose on foreign goods. It also increases tariffs on auto parts unless 75% of the goods are manufactured in North America (US, Canada or Mexico) instead of 62% under NAFTA. And it imposes tariffs if Mexico doesn’t triple the prevailing wage of 30% of Mexican auto workers.

      So yes, in return for a tiny reduction in tariffs for US dairies, it imposes a whole slew of tariffs on manufacturing. This is essentially what the point of the article is.

      1. MAFTA has 22 Chapter and 7 Annexes

        USCMA has 34 Chapters and multiple Annexes plus 14 Side Letters.

        Look, NAFTA has less Chapters so it means less regulations!

        NAFTA has multiple additions over the years and has allowed massive trade restrictions, including but not limited to keeping Google out of China because Google will not build a super spy internet for the Commies.

      2. And all of these things are great wins for the U.S.

  8. If this is the end result of the NAFTA re-negotiations, then it’s a failure for the Trump administration. These are paltry gains and additional costs that essentially round to zero or even slightly negative.

    1. Your citation fell off.

      1. Your strap-on fell off.

        1. Poor Duncan troll. Hillary’s dick fell out of your mouth.

          1. Poor Nazi troll living out his days in his mom’s basement.

            You do remember I am an anarchist and hate executive power regardless of tribal affiliation, right? So you trying to insinuate I have some love for the Bitch shows how little you read and comprehend.

            Understandable given how far up Tump has his cock down your throat.

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  10. “Measured against other aspects of the USMCA?such as new requirements for automobile manufacturers that will likely increase costs, limitations on how USMCA signatories can negotiate trade deals with other nations, and a sunset clause that would see the USMCA potentially expire in just five years”

    These are all good things, especially the latter two, which are designed to allow the U.S. to put its leverage to good use globally, and particularly against the rise of communist China.

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