Actually: Trump can’t unilaterally kill NAFTA; this is only a possible step toward any new trade deal involving Mexico; it’s probably not a good step; and it may not actually lead to any new deal at all.
In other words, it’s precisely the puffery we’ve come to expect from a president who doesn’t understand what his own administration is doing, or doesn’t care.
Trump campaigned on fixing our “stupid” trade deals, including NAFTA. And, at more than two decades old, this tripartite pact with Canada and Mexico does indeed require sprucing up.
The global economy has changed since the early 1990s. NAFTA doesn’t address major industries that barely existed (if they existed at all) when the agreement was negotiated, such as e-commerce. It also didn’t do much for labor or environmental standards.
Indeed, politicians have been vowing to update NAFTA for years.
Back in 2008, Barack Obama also campaigned on a promise to renegotiate NAFTA. He ultimately did, in the form of the Trans-Pacific Partnership. The 12-country trade pact included Canada and Mexico among its signatories, and contained extensive language modernizing trade rules (including a whole chapter on e-commerce) and raising labor and environmental standards.
Alas, one of Trump’s first acts in office was to pull out of TPP. Worse, he subsequently lobbed new tariffs in virtually every direction, including at our allies in North America. The fallout from Trump’s trade war-mongering has unquestionably hurt Canada and Mexico, as well as U.S. firms.
But on Monday, Trump proclaimed this front in his trade wars was over. We allegedly have a new deal with Mexico, he said — a bilateral agreement that will replace NAFTA, and leave Canada cowering in fear.
“A lot of people thought we’d never get here,” he declared.
But in truth, “here” is pretty close to where we were before.
There is still no signed Mexico deal. And, unfortunately for Trump, he does not actually have authority from Congress to split NAFTA into two separate bilateral deals.
Additionally, most of what’s in NAFTA is implemented by statute. That means that no matter what Trump says, most of its provisions will live on unless and until Congress actually, you know, passes a new trade law. Which a Republican-led Congress doesn’t seem keen to do, at least if the new law in question is more protectionist than the one we have.
Congress also isn’t the only barrier to ditching NAFTA in favor of separate bilateral trade agreements. Canada and Mexico have each said that any new trade pact that results should include the involvement of all three countries.
In fact, during Trump’s Monday Oval Office event, Mexican President Enrique Peña Nieto said no fewer than four times that he still expected Canada to be part of any final agreement.
He even closed his call by saying: “We’ll be waiting for Canada to be integrated into this process.”
So did the recent round of discussions between Mexico and the United States produce any results?
Sort of. But it’s hard to call it progress.
The United States and Mexico seem to have resolved some of their differences, including on automotive “rules of origin.” These complicated new rules would add burdensome requirements for any cars that could be imported into the United States from Mexico without tariffs.
Based on what we know so far, these requirements would likely require an enormous expansion of the administrative state (not something Republicans usually support), raise the cost of cars to consumers, and possibly reduce the number of cars assembled in North America — which is, of course, the opposite of their intended effect.
In fact, nothing announced thus far suggests the stuff we got Mexico to agree to would help the United States increase car exports to Mexico at all. “For autos, I am worried that the main outcome is a changing of the rules to allow us to trade less with Mexico,” Peterson Institute for International Economics senior fellow Chad P. Bown tells me.
And that’s if the deal actually goes through. Lots of hurdles remain, including within Mexico. The Mexican government has indicated that it wants any new deal signed before its next president takes office on Dec. 1.
That time frame effectively gives Trump exactly four days to get Canada on board since Trump must give Congress 90 days notice for a coming trade deal. If Trump wants to deliver on his campaign promises — and get any sort of trade deal, which he seems to desperately want ahead of the midterms — he’d best stop self-applauding and get back to work.