As befits a real estate tycoon with a knack for getting attention, President Donald Trump sometimes amplifies the sizzle before securing the steak. His announcement of a deal with Mexico to revive the North American Free Trade Agreement may turn out — like his denuclearization agreement with North Korea’sKim Jong Un in Singapore — to be more aspirational than tangible.
The U.S. Trade Representative office, which negotiates trade deals, describes this one as “a preliminary agreement in principle, subject to finalization and implementation.” It’s more like an engagement, then, than a wedding. The actual details may not match the claims. Any significant changes in the existing accord would require the approval of Congress, which is far from certain.
All of which has Midwest manufacturers and farmers uneasy. The Trump administration professes to be in the process of improving trade pacts that in some ways do disadvantage U.S exporters. Whether that broader effort, disruptive U.S. tariffs included, helps or hurts Americans remains an open question.
That said, the announcement offers some grounds for hope. The USTR says the two sides agreed on protections against piracy and counterfeiting and safeguards for intellectual property and digital trade. When NAFTA took effect in 1994, much of this realm — including, for example, Amazon — didn’t exist, and the accord is overdue for updating to address new technologies and markets. The negotiators, we are told, also found common ground on commitments to protect marine species and stop illegal fishing.
But these are not the areas that most animated the president’s perennial attacks on NAFTA, which he blames for the shift of some manufacturing, particularly in autos, from the United States to Mexico. What he claims to have achieved here is discouraging.
The big change is an agreement to require 75 percent of the components of each car to be made in North America, up from 62.5 percent, and to mandate that at least 40 percent of production come from factories paying workers at least $16 an hour. Both dictates would interfere with established supply chains and raise costs for producers and consumers.
Trump wanted the trade agreement to expire after five years unless it was renewed by the signatories. That sort of provision sows uncertainty. Companies would be reluctant to make big capital investments knowing their markets might be taken away in just a few years. Omitting a sell date, by contrast, sends a signal that the parties are in for the long haul. In the end, the negotiators decided the deal will last 16 years, although with a mutual review after six years.
A complicating element in the entire matter is Canada, the third party in NAFTA. It did not participate in these negotiations and may not be amenable to the changes they produced. Trump said he wants to rename the pact the “United States Mexico Trade Agreement.”
That may be mainly so Trump can say he kept his vow to get rid of NAFTA. But he raised the specter of new tariffs — or leaving Canada out of the new agreement entirely — if the Ottawa government rejects the new provisions. Either option would be bad for consumers and producers on both sides of our northern border.
Updating the current accord to cover topics that were neglected or unforeseen a quarter-century ago is a fine idea, as long as the focus remains on removing barriers to trade, opening markets for U.S. exports and fostering integration of the North American economy. “A big deal looking good with Mexico!” the president tweeted. We hope it lives up to his billing.