Like Trump University, the US Mexico Canada Agreement is a massive fraud. It is NAFTA light. The USMCA was negotiated badly, but will be promoted by the White House to claim that the president achieved another goal, the end of the North American Free Trade Agreement.
Meanwhile, NAFTA is still in force. The renamed trade agreement, the USMCA, won’t start until 2020 at the earliest, because of all of the signatures and approvals the deal needs from leaders and legislators. It may not even pass Congress. Under the Constitution, all treaties must be approved by a two-thirds vote in the Senate. There’s no doubt about it, the USMCA is a treaty, an agreement with foreign nations that will last many years. Nonetheless, the Trump administration will bypass the Treaty Clause and just seek a majority vote in both chambers, ignoring the Constitution.
Of 10 major problems with NAFTA, the Trump administration addressed only two issues, and even in those two areas — cars and dairy — the agreement significantly fails to achieve the goal of leveling the playing field.
Starting in 2020, to qualify for zero tariffs, a car or truck must have 75% of its components manufactured in Canada, Mexico or the US, a substantial boost from the current 62.5% requirement.
There’s also a new provision that a significant percentage of the manufacturing of the car must be completed by workers earning at least $16 an hour, or about six times what the typical Mexican autoworker makes. Starting in 2020, cars and trucks are required to have at least 30% of the labor on the vehicle done by workers earning $16 an hour. That percentage gradually moves up to 40% for cars by 2023.
` The problem with this mandate is that most of labor for $16 an hour will be done in Canada. Remarkably, Canada and Mexico each produce more cars per capita than the US. Cars are manufactured in Canada because of the weak Canadian dollar and because Canada has a government health insurance program that gives our northern neighbor a $1,500 advantage per car. Cars are made in Mexico because of its cheap labor. Neither the Canadian advantage nor the Mexican advantage were addressed in NAFTA 2.0.
And that is the best part of the new trade agreement.
The new NAFTA deal gives US farmers access to only 3.59% of the Canadian dairy market. Canada now has a punitive 300% tariff on dairy products from the Untied States. Canada agreed to provide new tariff rate quotas for US dairy products, which, in most cases, after reaching designated levels by year six of the agreement, will be raised 1% each year for 13 years. The result is the US may have access to about 3.6% of the Canadian dairy market, and that is for skim milk solids, not whole milk, not cheese, not ice cream and not yogurt. Ben and Jerry’s will still be banned in Canada.
Canada and Mexico challenged the US Country of Origin Labeling Act (COOL) for meat before the World Trade Organization. The WTO ruled that the US law requiring meat labeling was a non-tariff barrier and had to be eliminated. Congress caved in and dropped meat labeling from the law costing American meat producers $20 billion a year because Mexican beef could be mixed with American meat and consumers would be ignorant of the source of their hamburgers. American cattlemen supported Trump because they believed that he would reinstate COOL in the NAFTA negotiations. Trump failed to negotiate on the meat issue. So much for a tough negotiator.
Canada and Mexico’s grievances about our meat labeling law should have been handled via a NAFTA dispute panel. The new NAFTA 2.0 should have required that any dispute among the parties to the agreement be settled via the agreement, not by going to an outside organization, like the WTO.
Did you ever wonder why so many films and television programs are produced in Canada? Canada has been illegally subsidizing their film industry with billions of dollars in tax credits for more than a decade. In response, some states, including California and Louisiana, have enacted their own illegal subsidies to get film production there. NAFTA 2.0 should have dealt with film subsidies and outlawed all of them. Films should be made where the conditions and economics make sense, not because of some tax scheme that distorts the free market.
Trump supporters, including Justice Kavanaugh, love beer. But American beer companies have been banned from selling their brews in Canada. On the other hand, Canadians are free to sell Molson, Labatt and Moosehead lager in the US. Why did NAFTA 2.0 fail to deal with the unfair ban on American beer?
When NAFTA 1.0 was signed in 1993, there were three Mexican pesos to the dollar. Now there are 19. Mexicans could not, and still cannot, afford most American products. It is exceptionally difficult to compete against a third world country with a weak currency. That is why the European Union created the euro, so that the poorer countries like Portugal and Estonia, will not be operating with a weak currency. NAFTA 2.0 does not touch currencies. The three countries could have used the opportunity to create the North American Dollar that would have stabilized trade amongst the three nations, but failed to do so.
NAFTA 2.0 is a slight improvement over the original. But, in the main, the Trump administration substantially failed to negotiate an agreement that will level the playing field and bring jobs back to the USA. It is a promise made by the president that was broken by NAFTA 2.0.
Joel Joseph is chairman of the Made in the USA Foundation, a non-profit organization dedicated to promoting American-made products. Email joeldjoseph@gmail.com. Phone 310 MADE-USA.
From The Progressive Populist, December 1, 2018
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