Here’s a quick and dirty reaction to the White House announcement that it has reached a preliminary North American Free Trade Agreement (NAFTA) deal with Mexico, replete with President Trump’s usual hype: “A big day for trade, a big day for our country.” Five points (one positive, four negative):
(1) The best thing about the agreement — if it holds — is that it will remove the extreme uncertainty for businesses in all three NAFTA economies.
(2) The tentative “rules of origin” provisions for autos are an abomination — so complex and anti-competitive that they invite endless litigation and corruption (rules of origin govern what percentage of a final product must come from the three NAFTA nations).
(3) The old NAFTA dispute settlement system for investors has been gutted, leaving US industry and Congress with a huge dilemma as to whether to support the new pact.
(4) The auto/labor provisions (forcing Mexico to pay workers $16/hour for a number of jobs in Mexican auto plants, or four times the average hourly pay in Mexico) is a terrible precedent for mandating changes in domestic policy through a trade agreement.
From that depiction, it sure looks like more heavy-handed protectionism to me. I'll be scouting around for more reactions.(5) Where does this leave Canada and the evolved North American economic bloc? Trump is already referring to the deal as a US-Mexican agreement, with the possibility that Canada may be left out if it balks at the current terms. Some in Congress are already balking at this wholesale flouting of Congressional prerogatives.
For instance, this is going to separate the economically literate from those grandstanding about a "good deal for the American people" when it gets to Congress, which is going to happen soon. There's also the matter of where Canada stands:
Always squeezing somebody, that's the Very Stable Genius way. And it's usually an ally.