Democrats and organized labor risk killing tangible improvements in the North American Free Trade Agreement that would benefit ordinary working Americans by insisting that Mexico change its labor laws to comply with the deal prior to U.S. ratification. We have no reason to believe that Mexico City will not uphold its end of the deal.
NAFTA was implemented in 1994 — long before the digital revolution, the mapping of DNA and biologicals, and Chinese mercantilism so fundamentally threatened North American jobs. Organized labor complains that the agreement continues intellectual property protections that raise drug prices but trilateral trade negotiations are not an appropriate venue for addressing U.S. health care costs — it’s merely an obstructionist tactic.
And Americans have broader—jobs protecting—intellectual property concerns than just drug prices.
NAFTA enabled integrated supply chains across all three countries, permitted the auto and other industries to keep activities on this continent that might have gone to Asia, and helped Mexico avoid the instability that has plagued nations further south.
Detractors point to the $78 billion U.S. trade deficit with Mexico. The facts are that Mexico City used NAFTA to become a springboard for global free trade. It has negotiated deals with the European Union, Japan and more other countries than any government on the planet. Manufacturers and service providers can set up shop in Mexico and take advantage of preferred access to all those markets—they can’t do that from the United States.
That giant sucking sound that Ross Perot talked about was not cheap labor—though that surely helped—but simply a smarter trade policy than the Americans, who have become decidedly adept at blaming others, whether justified or not, for trade deficits, job losses and mounting foreign debt.
President Donald Trump complains about a trade deficit with Canada that does not exist—we have a deficit on goods but once services are added, we have a modest surplus with our northern neighbor.
Whatever you think about globalization, America’s chief negotiator, Robert Lighthizer deserves high marks for his accomplishments in the new U.S.-Mexico-Canada Agreement.
For those who like free markets and international competition, Lighthizer won better access in Canada for American dairy, poultry and eggs—make or break goals for U.S. farmers. The agreement contains stronger protections for intellectual property, much freer access for U.S.-based technology services, and safeguards against predatory regulatory tactics—for example, it prohibits governments from requiring that cloud and data services be located in their country.
Recognizing the threat that China poses with its subsidized steel and aluminum and state-promoted auto industry, it increases from 62.5% to 75% the North American content required in autos to qualify for duty-free treatment and requires that the metals in cars be largely of North American origin.
And it also includes tougher content requirements—what trade wonks call “rules of origin”—in textiles, chemicals, glass and optical fiber.
It requires that 40% to 45% of the labor in motor vehicles be paid at least $16 an hour. This mostly applies to Mexico as the United Autoworkers and their Canadian brethren get a lot more than that in wages and benefits.
Free trade purists see such provisions as protectionist but trade agreements are not negotiated on classroom blackboards, where workers seamlessly move from production jobs in auto parts plants in Michigan to coding jobs in Seattle when Chinese or Korean imports, benefiting from state subsidies or a cheap currency, knock off their jobs.
It’s hardly free trade for a Taiwanese bicycle assembler to source parts in China, attach pedals and wheels in Mexico and then send the product north to evade U.S. tariffs.
Without handicapping the deal with complexity only benefiting trade lawyers and bureaucrats and to combat China playing one USMCA partner against another, the agreement imposes on Mexico and Canada a tough choice — free trade with China or America.
If they enter into a deal with the Middle Kingdom, they are out of agreement and the USMCA becomes a bilateral deal between the remaining two partners.
Like sausages and laws—free-trade deals are made in the real world with folks for an appetite for progress. The possible is never perfect, and House Democrats should put aside their partisan instincts to help pass it.