With New NAFTA Deal, Trump Avoids Disaster But Falls Short on Big Trade Promises

Trump touts the deal as “truly historic news for our nation and indeed for the world,” which is probably overstating it. Photo: Chip Somodevilla/Getty Images

For a glimpse at the sort of trade policies the Trump administration might be touting around the world if it had mixed its chest-thumping nationalism with smart assessments of global dynamics and savvy negotiations, look no further than Sunday’s announcement that U.S. and Canadian negotiators have struck a deal to keep Canada in a successor trade pact to the North American Free Trade Agreement.

The Trump administration managed to put intense pressure on Mexico, which struck a bilateral trade deal last month, and then Canada, by intimidating the Republican Party into largely ineffective protest, neutralizing organized labor with both friendly consultations and appeals directly to their members, and sending just enough winks to businesses (plus a giant tax cut) to keep them from a full-on revolt.

Trump was aided by the leadership transition occurring in Mexico City, and the weaknesses of the government in Ottawa. It’s unlikely a U.S. administration could have extracted as much as it did from Mexico if its outgoing government hadn’t wanted so badly to complete a deal that kept pro-business planks in place before handing the reins to leftist President-elect Andrés Manuel López Obrador in December. And although Canadian prime minister Justin Trudeau sees a bump in the polls every time he fights with Trump, that’s not enough to hide his troubles; the luster of his youthful charm is wearing off, and his party faces a tough fight in elections next year. A collapse in the flow of products to Canada’s largest trading partner is a crisis he can’t afford.

The table had also been set for the Trump administration by Obama-era negotiators, who had worked through the modernizations that businesses wanted while haggling over the Trans-Pacific Partnership deal, or TPP, which Trump tanked. (Canada and Mexico went on to join the 11-nation trade pact salvaged from the remains of TPP.) The underlying changes that make NAFTA into the new United States–Mexico–Canada Agreement, or USMCA, are the old provisions of TPP.

These are all lucky circumstances that just fell into Trump’s lap. But the negotiating process did have some uniquely Trumpian elements. First, U.S. negotiators had the advantage of the president’s repeated threats to levy additional tariffs on a variety of products. The withdrawal or delay of those tariffs could be cast as either a U.S. “concession” or a U.S. “win,” depending on who was doing the talking. And thanks to Trump assiduously tending to his base, generally ensuring that it will accept his description of events, his administration is in a position to sell even a small step forward on trade as a great triumph — a situation the White House hasn’t found itself in for at least a decade.

USMCA has a little bit of something for a lot of groups: modernized trade; easier e-commerce; some give on Canada’s dairy protection, but not enough to really change Canadian industry; some constricting of industry’s ability to challenge government regulation; a small improvement on labor rights, but with no additional levers to enforce them; and a shift in auto rules that may ultimately reinforce the existing trend away from small cars being manufactured in North America.

Another administration would have gotten more or less this deal — inside TPP or outside of it — and it probably wouldn’t have involved 20 months of harassing our neighbors with belligerent rhetoric. Still, were the people who said Trump knew what he was doing on trade right all along?

It’s too early to say. With Trudeau’s government at risk, and a new Mexican government defining itself against its predecessor and against Trump, political turmoil could still doom this deal. Though not impossible, it’s difficult, given the current climate in Washington, to imagine the agreement moving through Congress in the next few weeks. Democrats in Congress are busy looking for ways to put their stamp on the agreement as the price of ratification.

Then there’s the question of whether this deal, despite all the effort that went into it, actually addresses any of the underlying dynamics that animated Trump voters — or critics of trade on the left. The deal shores up and modernizes the existing trade system because that’s what there was energy across the U.S. political system to do — and because, quietly, even groups that are critical of NAFTA share the concern that a collapse of transcontinental economic relationships would help no one.

But nothing in the agreement brings capital or middle-class jobs to communities where they are currently scarce. It doesn’t mark the paradigm shift toward a low-carbon world economy that investors and climate activists alike have called for. It doesn’t deal with the challenge of rebalancing power between the largest corporate and finance entities on the one hand, and individuals and communities on the other. And, like NAFTA before it, it sustains the foundations for intergovernmental cooperation without creative approaches to the ways security and economics interact — for instance, by addressing how economic change is contributing to security challenges in Central America and Mexico that, in turn, affect U.S. security, economics, and politics.

So, one cheer for keeping the existing system from collapse. Hold the second and third cheers — you’ll need the energy to address the failed opportunity to move North America’s economic interactions toward where they need to be, not just to keep our societies functioning, but to make them whole.

Trump’s New NAFTA Avoids Disaster, Falls Short of Promises