NAFTA 2.0?

Back in the day globalization took off big time in the 1990s and the presidency of Clinton….when it was signed into law I said then that it was a bad idea for workers not just here but around the world.

I was a supporter of the Trump’s idea to trash the deal and come forth with a new more inclusive deal.

But after 3 and half years and lots of talk and tariff stuff we have a new “NAFTA”…..

President Trump has touted the North American Free Trade Agreement (NAFTA) as the worst trade deal ever negotiated—and vowed to replace it. Today, it has been replaced by the U.S.-Mexico-Canada Agreement (USMCA) and, unbeknownst to him, this agreement should hold that unsavory title. While the USMCA makes some modest improvements (largely by borrowing from the Trans Pacific Partnership, which Trump withdrew from), it also includes some protectionist elements and veiled industrial policy. Furthermore, while the administration has been rushing to implement the deal in order to score political points on the campaign trail, businesses are left to sort out the new rules and paperwork that they will have to start following as of today. USMCA was pitched as a way to reduce uncertainty among the three trading partners in the face of threats of withdrawal from NAFTA that Trump made regularly. But at the end of the day, much uncertainty still remains.

The first area where we are likely to see some challenge in implementation was exactly the issue that received an inordinate amount of attention during negotiations: autos. The rules that determine whether a product can cross duty free across the border—rules of origin—were tightened for the auto sector. In NAFTA, passenger vehicles were required to have 62.5% North American content, and in the USMCA that has been increased to 75%. This means that auto producers will need to source more components from the region, in addition to ensuring that 70% of the steel and aluminum used in production also comes from Canada, Mexico or the United States. On top of this—a first ever in a trade agreement—a new labor value content requirement was added that requires auto makers to have 40–45% of their auto content made by workers making at least $16 an hour. This is clearly aimed at moving production out of Mexico, which has been an important link in the North American auto supply chain. For automakers these rules will raise some challenges in implementation, not least because auto production is so fragmented, and that every producer up and down the supply chain must abide by the new content rules. Coordinating this is no easy feat. Canada has yet to pass the regulations that will bring the auto rules into force, and with today being a holiday in Canada, that process will undoubtedly be delayed. In the United States, guidance on the regulations has been shared, but the interim final rules on uniform regulations and labor value content were just published today.

I do not see how this would benefit the workers or make their lives more enriched…..once again the words of Trump have proven to be total crap.

I Read, I Write, You Know

“lego ergo scribo”

2 thoughts on “NAFTA 2.0?

  1. Trade agreements are only as good as they last. With Trump in charge, I doubt they will last long before he gets upset and cancels them.
    Best wishes, Pete.

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