Negotiators and politicians got one thing right when they christened the North American Free Trade Agreement replacement: it contains no reference to free trade.
In Donald Trump’s world, free trade is a one-way street leading to Washington, and in the United States-Mexico-Canada Agreement (USMCA), the U.S. president’s administration gets rid of many of the basics that free-trade deals more traditionally have been about – initiatives such as removing barriers to trade and investment for their participants. But on the road to making America great again, the Trump negotiation team’s approach is to add regulation, complication and cost requirements to qualify for tariff reductions. That is especially true in the lucrative North American automobile sector, where the increase to 75% from 62.5% in the share of a vehicle’s components that must come from within North America, coupled with higher minimum wages paid in that sector, will drive up the cost of cars for consumers.
The USMCA’s successful incursion into Canada’s supply management system should in theory reduce the price of dairy and other monopoly-marketed products in this country. But the impending Canadian taxpayer compensation that will be earmarked for salving any wounds suffered by Canadian dairy farmers from the concession to America will offset any price cuts for years to come.
Remember, too, that the USMCA does not remove the Trump administration’s steel and aluminum tariffs levied on Canada, nor does it eliminate any future threats of tariff action from the protectionist U.S. regime. Instead the USMCA erects barriers to Canada’s ambitions to cultivate trade and investment ties with “non-market” economies. That sounds a lot like China, and that sounds a lot like spreading the U.S. protectionist mantra well beyond its borders and well beyond its trade mandate.
That all adds up to anything but a free-trade deal and lays the groundwork for a regressive new export from the United States: faux free trade for all.
