Trump: Bye, Bye NAFTA Hello USMCA — I Make the Best Deals Ever the Best Ever Believe Me

Official White House public announcement

(Aren't I the Great Deal Maker?)

USMCA (U.S.-Mexico-Canada Agreement) New Logo

FIRST UPDATE (October 2, 2018): See in the dairy section below.

Another potential insane, distorted, false, and crappy deal from Trump.

Some early analysis is here from the Acton Institute.

So, who benefits from this new “USMCA” trade agreement replacing NAFTA? The primary beneficiaries of the agreement are labor unions, dairy farmers, drug manufactures, and companies that provide automation for manufacturers (e.g., robot makers).

The agreement will require at least 30 percent of cars (rising to 40 percent by 2023) to be made by workers earning $16 an hour. This will force more cars to be produced in the U.S. and Canada since the typical manufacturing wage in Mexico is only about $5 per hour.

The agreement also requires Mexico to make it easier for workers to form unions, which will make them less competitive against more productive unionized workers in the U.S. and Canada.

U.S. drug companies will also be able to sell pharmaceuticals in Canada for 10 years (rather than 8) before facing generic competition.

Because the agreement makes human labor in the three countries somewhat more costly, companies that create robots and other automation will likely be the long-term beneficiaries.

Who are the biggest losers from this agreement? (Mixed on this part):

FIRST UPDATE HERE re: U. S. dairy farmers will also gain greater access to the Canadian market. Because of new restrictions on how much dairy Canada can export, there is the potential for U.S. dairy to gain a greater market share in foreign countries – source CTV News here in part:

CLARIFICATION FROM THE CANADIAN SIDE OF THIS DEAL: “It feels like a death by a thousand cuts,” Cambridge, Ontario dairy farmer Mike Bechtel told CTV.

Canada’s free trade pact with the EU gave foreign producers access to about 2.25% of their dairy market. Then the TPP opened up another 3.25% for the 10 countries to import their products. 

This USMCA will increase American access to 3.59% of the overall dairy market – thus another blow to the future of the Canadian industry.

According to the dairy industry, the net effect of the increased American allotment will allow tens of thousands of ton of U.S. dairy products on Canadian store shelves, at the expense of shelf space currently given to Canadian-made items.

The Trudeau government said it will compensate affected operations. Many dairy producers say they are not particularly interested and remain skeptical they will ever see that money saying it’s a joke and some say they’d rather not have a compensation package and keep the market fairer. 

They heard similar promises after the TPP and European deals were signed, but never saw any compensation and also discouraging young people from entering the dairy business in Canada.

My Note on This: So, Trump hurts Canadian milk producers while helping ours and blames them for allowing us to harm their industry... Well, I guess that's Trumpian SOP showing he is the best deal-maker in history, right? Okee, dokee, then. 

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As with almost all protectionist trade agreements, consumers are the ones who will be hurt the most. As the Washington Post notes, economists and auto experts think USMCA is going to cause car prices in the U.S. to “rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore.”

Because the restrictions on Canadian steel and aluminum also remain in place, businesses that use those materials in manufacturing will pay inflated prices and their products will be less competitive on the global market.

How long does the agreement last?  Unlike NAFTA, which had an indefinite time-frame, the USMCA will expire in 16 years. The agreement can be overturn sooner, of course, by a U.S. administration more open to free trade.

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More analysis here from the Washington Post (via MSN) – ref: Unions react.

There were early signs that some labor groups found the deal unacceptable and would fight for changes, even if that might ultimately scuttle any agreement. The reaction from organized labor is certain to weigh heavily with Democrats.

Leo Gerard, president of United Steelworkers International said: “There are provisions in the draft agreement between the United States and Mexico that represent improvements over NAFTA, but there are also provisions that must be removed. Further, we have not evaluated what changes resulted from the just-concluded agreement to include Canada.”

The new pact, preserving the three-country format of the original NAFTA favored by business groups and congressional Republicans, is expected to be signed by Trump and his Canadian and Mexican counterparts in 60 days, with Congress likely to act on it next year. 

But even as he hailed the new deal, Trump acknowledged the tough road ahead on Capitol Hill, saying in part: “In theory there should be no trouble, but anything you submit to Congress is trouble no matter what. They’ll say Trump likes it, and therefore we won’t approve it,” presuming to mean: [Democrats might oppose the deal for narrowly political reasons] saying: “Frankly they’ll have 2020 in mind.”

My 2 cents: No matter the issue, positive or negative, failure or not, Trump will always praise himself while blasting DEMS no matter the topic and yet he claims they are “playing politics” implying that he is not, right – yeah, right. 

More analysis of this “deal” will be forthcoming and reported on – bet on it. 

Thanks for stopping by.