Free Trade

3 Winners and 3 Losers From Today's North America Trade Deal Announcement

Trump, big labor, and America's reputation as a trading partner emerge as winners, but free trade takes the loss in the USMCA.

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Less than an hour after announcing two articles of impeachment aimed at ending President Donald Trump's tenure, Speaker of the House Nancy Pelosi (D–Calif.) announced a handshake deal with the Trump administration to pass a new North American free trade deal.

There is still no clear timetable for a congressional vote on the new United States-Mexico-Canada Agreement (USMCA), and details regarding specific changes to the deal made to appease House Democrats remain sketchy for now, but Monday's announcement is a big turning point after a monthslong standoff. U.S. Trade Representative Robert Lighthizer is heading to Mexico City to meet with top trade officials from Canada and Mexico to sign (rather, re-sign) the amended agreement, which will then be presented to Congress.

Even if some specifics remain unknown—new environmental and labor standards put into the USMCA at Pelosi's insistence are likely the most important pieces yet to be detailed in full—there's enough information about the USMCA to draw some sweeping conclusions, in true Trumpian fashion, about the winners and losers.

Winner: A lot of the politicians involved

Tuesday's announcement was mostly about politics, not policy.

This is an obvious win for Trump, of course, who entered office with a promise to renegotiate the North American Free Trade Agreement (NAFTA)—the 1994 deal that Trump routinely castigates as the worst deal in U.S. history. In the end, the USMCA looks a lot like NAFTA, but Trump will get to take victory laps at his 2020 campaign rallies for delivering on his promise to rename kill NAFTA.

It's a win for Democrats too. Though some might be surprised that Pelosi announced this deal with the White House on the same day that the House of Representatives outlined plans to officially charge Trump with abuse of power and obstruction of Congress, it actually makes a lot of sense. She's sending the message that Democrats aren't obsessed with impeachment—as some on the right have claimed—and that Congress will continue to do other important legislative work even as the impeachment process continues.

Loser: Free trade

On the whole, the USMCA is an agreement that will increase barriers to trade across North American borders and will impose more managed trade. All trade deals are a form of managed trade, of course, but relative to the standards set by NAFTA, the USMCA seems like a step backward.

The main way the USMCA reduces free trade is in the so-called "rules of origin" that will apply to cars built in North America. In order to cross borders tariff-free, 75 percent of the value of materials within a car or truck will have to be produced in North America. Additionally, 40 percent of the steel used in auto production will have to come from U.S. steel plants. The deal also gives the U.S. government the ability to impose quotas on imported cars from Canada and Mexico. That combination of protectionism and increased federal power over the decisions of private businesses is a major black mark against the deal.

Winner: The AFL-CIO

Take a step back and appreciate how deeply weird it is that the AFL-CIO has endorsed the rewritten USMCA. Labor unions never support trade deals. Ever. The AFL-CIO opposed both NAFTA and the Trans-Pacific Partnership (TPP), the ill-fated 12-nation deal the Obama administration tried to strike—and both of those agreements were the product of Democratic administrations.

The AFL-CIO appears to have had a significant hand in making last-minute changes to the bill, as Pelosi on Tuesday specifically (and repeatedly) thanked Richard Trumka, the union federation's president, or his input. The final version of the deal will allow stricter enforcement of labor standards in Mexico, "including a process that allows for the inspections of factories and facilities that are not living up to their obligations," the AFL-CIO said in a statement.

Loser: Manufacturers operating in Mexico (and maybe here, too)

The intended consequence of several components of the USMCA is to encourage businesses to shift production from Mexico into the United States. That's why the Trump administration has pushed for the heightened rules of origin requirements and new rules that effectively hike the minimum wage to $16 per hour in Mexican auto plants. More accurately, they are intended to make Mexico a less attractive option for manufacturing by imposing higher costs on businesses that manufacture goods in Mexico and setting up additional barriers to bringing those goods into the United States.

But the unintended consequence of those new rules might be a reduction in manufacturing across all of North America. When it comes to cars, for example, companies might find it cheaper to simply pay the 2.5 percent import tax rather than comply with the new standards to be able to trade duty-free. "You start thinking very carefully about whether it makes sense to do all your production in Asia, or in Latin America, or outside the region," says Dan Ikenson, director of trade policy studies at the Cato Institute, a libertarian think tank.

Winner: America's reputation

A breakthrough in securing passage of the USMCA through Congress means stability in North America, where Trump's election threw open the possibility of tearing up NAFTA. That would have been a disaster, since the mere existence of NAFTA boosts the U.S. economy by about 0.5 percent per year.

It also makes the next trade deal easier. "The best argument for the agreement remains that its failure will further erode U.S. credibility as a trading partner," says Clark Packard, trade counsel for the R Street Institute, a free market think tank. "If USMCA fails, that would make two agreements in a row that failed to be passed by Congress [after the TPP]. Why would other countries want to engage in trade talks with a party who has proven itself incapable of passing agreements that are negotiated?"

Loser: Congress's anti-tech crusaders

A bipartisan group of lawmakers had pushed Pelosi to revoke a part of the USMCA meant to protect online free speech across national borders. As Reason has previously reported, those members of Congress were worried that enshrining liability protections for online platforms into trade deals would make it more difficult to strip away those same protections domestically.

Thankfully, that didn't happen. Asked about it at Tuesday's press conference, Pelosi said she did not want to add more issues to the negotiations, which were already bogged down by debates over labor standards, environmental rules, and enforcement mechanisms. That's certainly not going to put an end to Congress' misguided effort to strip away online free speech protections, but it's a small victory for liberalism in the midst of a larger fight.

NEXT: What It Takes to Make a Federal Judge "Perplexed and Perturbed"

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  1. BOEHM IMPLODING!!!

  2. It’s hard to persuade the American people to want more free trade when you’re an elitist. Find a way to sell international trade as a benefit to average Americans–rather than something that should be inflicted on them over their objections–or we’ll see more of this kind of populism in the future rather than less.

    Learning that libertarian capitalist policies come through persuasion rather than elitism shouldn’t be sad revelation. The idea that libertarian capitalists might imagine that trade deals were something that should be inflicted on the American people over their objections and against their will was fucking depressing.

    The price of freedom is eternal vigilance, and a big part of that is embracing your fellow Americans and caring about them when you preach the capitalist gospel.

    Going back to the days before NAFTA would have been a tragedy.

    1. “Find a way to sell international trade as a benefit to average Americans”

      The problem is that Americans are better economists than Reason and their friction free economic models and dogma that enriching foreign totalitarians is always a win as long as you save a nickel at Walmarts.

  3. Right off the bat, if the politicians are winning, it’s a sure bet everybody else is losing. Any time you hear the words “bipartisan agreement”, the little hairs on the back of your neck should stand up because there’s some bad shit about to come down.

    1. If Donald Trump wins a trade agreement deal with China, that’s a bad thing for the United States? Why is that the case?

      Was it bad when China joined the WTO in the first place?

      If you think things must necessarily be bad for the American people if Donald Trump wins, you probably have TDS. If you think all trade agreements are bad because politicians negotiated them, then you’re just irrational for other reasons.

      1. He merely stated the obvious: that if politicians are happy, better check your wallets.

        1. Obvious to who? Politicians want to be re-elected and having something positive to show the voters increases their chances.

          1. Turn in your libertarian card if you actually think a happy politician is good.

            1. That’s quite the generalization.

            2. Trade deals aren’t necessarily bad because politicians negotiated them.

            3. Fuck off Mary

      2. He never even mentioned Trump. And Jerry’s not wrong, if both sides are agreeing on something, it probably means they’re about to take something away from you.

        1. Its still an idiotic take even if you repeat it.

      3. The very concept of “winning” a trade deal is an oxymoron. Especially as applied to an individual, president or not.

        Trade deals are managed trade but better than no trade. There are some businesses and individuals who gain and others who will lose.

      4. “Was it bad when China joined the WTO in the first place?”

        Yep. Total mistake. All we did was enrich the dictatorship enslaving the largest population in the world.

        The Chinese were supposed to all transmogrify into Thomas Paine by now after joining the WTO and raising living standards. Instead, we’ve just enriched Emperor Xi and the Chinese Communist Politburo.

        Luckily, God Emperor Trump arrived in time to squash the Commies and usher in a thousand years of US prosperity.

        Did you hear that the WTO has been knee capped by the God Emperor vetoing any more judicial appointments to the WTO?

        Looks like it’s bilateral trade negotiations for everybody, with the US always having the leverage as the more powerful partner.

        Also, the US just became a net energy exporter, and those exports will only grow.

        This glorious American future brought to by by Orange Man and the Deplorables who supported him, over the hysterical pants shitting opposition of @Reason.

        You’re welcome.

        MAGA

    2. While I normally agree, Trump offered free trade at the G-7 Summit and that offer was rejected by our trading partners.

      Democrats evidently feel that they have to get on the Trump train to mitigate the upcoming election disaster of 2020 for the Party of slavery. Trump has stolen many American workers from the Democrat Party over fighting our trading partners on lowering trade restrictions.

      The smell of desperation from Democrats is permeating this reason website.

    3. The only reason “politicians” are happy is because Trump base got what it wanted and Trump Ds who make up the pro-Pelosi camp got what they wanted too. Those people are really not doing well getting dragged into impeachment.

  4. As a Koch / Reason libertarian, there is exactly one question I ask when deciding if I support or oppose a particular economic policy. And that is “Will this make the richest people on the planet even richer?”

    Drumpf’s economic record is historically awful when judged by that metric. I have no reason to believe things will change now.

    #VoteDemocratToHelpCharlesKoch

    1. #LibertariansForTheOligarchy

  5. She’s sending the message that Democrats aren’t obsessed with impeachment…

    I think it’s more that she’s not obsessed with impeachment, other than maybe trying to stave it off for her party’s own good.

  6. I await with pleasure the comparison of NAFTA and USMCA long promised by lc1789:

    loveconstitution1789|12.3.18 @ 10:20AM|#

    Do you need me to link the rules of NAFTA and USCMA so you can compare and contrast the “worseness” for us?

    1. Fuck off SQRLSY

  7. HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

    Boehm and Alphabet troll have a lot of work to do comparing and contrasting NAFTA and USCMA.

    1. No, we have no work to do, because you promised to do it for us. We only await your wisdom.

      1. So you’re finally admitting you’ve never read either deal?

      2. Your quote above is him providing you a link to both so you can compare them to support your position. Is there something else I’m missing?

        1. Nope. ABC has a habit of making absolutist claims without having any idea what he is talking about. When you ask him to show you actual data to support his position he goes into a rage.

          1. It’s a badge of honor to have such confused opponents.

    2. Poor Alphabet troll does not know how to compare and contrast.

      1. I don’t need to. I just await your promised comparison and contrast. As you are an honorable commenter, it should be along any minute now.

        1. But you’re an idiot who doesn’t know what a metaphor is so why would anybody do anything for you and not just make you do it yourself

  8. ╔════╗───────────────╔═══╦═══╦═══╦═══╗─╔╗╔╗╔╗
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    ──║║─║╔═╣║║║╔╗╔╗║╔╗║─║╔══╣║─║║╔══╣║─║║─╚╝╚╝╚╝
    ──║║─║║─║╚╝║║║║║║╚╝║─║╚══╣╚═╝║╚══╣╚═╝║─╔╗╔╗╔╗
    ──╚╝─╚╝─╚══╩╝╚╝╚╣╔═╝─╚═══╩═══╩═══╩═══╝─╚╝╚╝╚╝
    ────────────────║║
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    1. Trumpty Dumpty, He’s quite off-the-wall,
      Trumpty Dumpty won’t stay in His toilet stall
      He just goes ahead and takes His shits,
      Totally regardless of whereever He sits
      Whenever He simply, no way, can sleep,
      He Twits us His thoughts, they’re all SOOO deep!
      He simply must, He MUST, Twit us His bird,
      No matter the words, however absurd!
      He sits and snorts His coke with a spoon,
      Then He brazenly shoots us His moon!
      They say He’ll be impeached by June,
      Man, oh man, June cannot come too soon!
      So He sits and jiggles His balls,
      Then He Twitters upon the walls
      “Some come here to sit and think,
      Some come here to shit and stink
      But I come here to scratch my balls,
      And read the writings on the walls
      Here I sit, My cheeks a-flexin’
      Giving birth to another Texan!
      Here I sit, on the pooper,
      Giving birth to another state trooper!
      He who writes these lines of wit,
      Wraps His Trump in little balls,
      He who reads these lines of wit,
      Eats those loser’s balls of shit!”

      1. Some people do an excellent reporting while they are looking in a mirror.

      2. What drugs are you talking?

        1. Taking.

          Anyway, asking for a friend.

      3. Yo….the iambic pentameter needs some work. 🙂

      4. Fuck off Mary

      5. “Trumpty Dumpty, He’s quite off-the-wall,
        Trumpty Dumpty won’t stay in His toilet stall”

        Already blows the meter in the first two lines.
        Sad.

    2. #Trumpslide2020

    1. #Winning

  9. Trump 2020

    Because F you again

    1. Well, fuck progtards anyway. Progtards should always be made to suffer.

  10. “Free trade” only benefits big global corps. To hell with that shit.

    1. What Globalists call free trade is a set of foreign trade, tax, and immigration policies that benefit foreigners and US corporate ownership over US labor.

      Why should domestic *labor* be taxed when purchased, but not foreign goods?
      Cui bono? The international ruling class and foreigners.

      Infamous communist Adam Smith is on Trump’s side, favoring tariffs to offset local taxes on production.
      https://ibiblio.org/ml/libri/s/SmithA_WealthNations_p.pdf
      Wealth of Nations, pg. 356

      “It will generally be advantageous to lay some burden upon foreign industry for the encouragement of domestic industry, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the borne market to domestic industry, nor turn towards a particular employment a greater share of the stock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax into a less natural direction, and would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it.”

  11. oh no, Eric is talking economics again

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  13. relative to the standards set by NAFTA, the USMCA seems like a step backward.

    the AFL-CIO has endorsed the rewritten USMCA. Labor unions never support trade deals. Ever.

    It appears obvious that they supported it because it made trade less free.

    1. “Trade is so much more free when we buy more from Emperor Xi’s slave state.”

  14. Winner: America

    And Reason just can’t stand it!

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