Here’s something about trade some assembly line autoworkers understand that our president may not realize: You really can’t separate the US and the Canadian and Mexican auto industries. They are now one industry, and one interconnected market.
The idea of imposing tariffs on automobiles assembled in either country, especially Canada, something President Trump was threatening to do, is pretty much the same as imposing tariffs on cars assembled in Sterling Heights. So it’s a good thing that idea got dropped.
Dropped, that is from the final version of the new blockbuster trade treaty between the United States, Canada and Mexico that was finally agreed on early this week. Mr. Trump, who campaigned for years against the North American Free Trade Agreement — NAFTA — insists this is not a new NAFTA; he calls it USMCA instead, for U.S.-Mexico-Canada- Agreement.
But of course it is a new NAFTA, and even his own trade representative has been calling it that. The fact is that NAFTA badly needed to be renegotiated. The treaty was almost 25 years old, and there is nothing in it about e-commerce or the internet, because both those things barely existed at the beginning of the 1990. There were other parts that had gotten creaky as well.
NAFTA had also been, right from the start, politically controversial. Though it was strongly supported by President Bill Clinton, a Democrat, most Democrats in Congress opposed it, especially from manufacturing states like Michigan. Congressman David Bonior of Macomb County, then the third-ranking Democrat in the House, led the opposition to it.
They knew what Clinton denied, that NAFTA would cost manufacturing jobs, because it would make it easier to outsource them to Mexico. This indeed happened.
But economists say that most of the 5.5 million jobs that have been lost would have disappeared anyway, thanks to automation and globalization. One Harvard professor estimated the number lost because of NAFTA at no more than 150,000. That’s still significant.
However, it also seems clear that NAFTA actually has been good for the economies of all three nations overall, and may have even helped our auto industry more than it hurt it. That’s because it created among its members a far stronger and more integrated multi-national production and assembly operation. At least one senior economist believes Ford may even have been saved by its Mexican division when times turned tough a decade ago.
So is the new agreement better than the old one, or worse? Well, it does seem likely to make cars more expensive. NAFTA required that slightly less than two-thirds of car parts be manufactured in the U.S., Canada or Mexico; under the new treaty, that will be 75 percent.
On the other hand, there are wage provisions that could cause some jobs to be moved back here from Mexico. It will allow American farms to import Canadian dairy products. And it has a series of important provisions to protect intellectual property rights.
But will the U.S. Senate ratify the treaty?
They should – but they won’t even take it up till next year, and it isn’t clear which party will be in control or who will be running that body then.
In the meantime, NAFTA will remain in effect — and even though it’s that treaty so many people love to hate, that really isn’t such a bad thing.
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