President Trump Signs USMCA Deal at a Strategically Perfect Time

Early last Wednesday, US President Donald Trump finally signed the revised North American Free Trade Agreement into law, fulfilling one of his long-awaited key campaign promises, and halting more than 2 years of strenuous negotiations over the continent’s trade rules. The trade pact, now known as the United States-Mexico-Canada-Agreement, updates the 25-year-old NAFTA, with stronger protection for workers and the digital economy, expanded markets for American farmers, and has brought new rules to encourage auto-manufacturing in North America.

The USMCA will provide assurance about the direction of the North American economy for the various companies that rely on the rules to carry out their businesses. The journey to the signing of the trade USMCA trade deal has been a rough one since at one point, President Trump threatened to leave Canada out of the deal completely. There was a lot of apprehension surrounding the agreement given that some of the Congressional Democrats said that the new USMCA had not included strong enough provisions related to labour, the environment and access to pharmaceuticals yet it was these same people whose support was needed to approve the pact.

It, however, took months of tough negotiations last year for Mr. Trump’s trade advisers to drill in significant concessions that ultimately won over the Congressional Democrats, as well as the A.F.L-C.I.O. Speaker Nancy Pelosi was quick to say, “what the president is signing is quite different from what the President sent us.”

The USMCA agreement makes up an important political victory for Trump and his second trade deal win of the month, since signing an initial trade pact with China just two weeks ago, making him the centre of attention as he heads into his re-election campaign. Even though his deals with Japan and South Korea are smaller than traditional trade agreements, the President can still thump his chest and claim that he has re-negotiated trade terms with countries responsible for over 50% of American trade.

He proudly praised the new North American trade deal, calling it a ‘colossal victory’ for farmers and factory workers and the ‘largest, fairest, most balanced and modern trade agreement ever achieved.’ Trump has all along ridiculed the original NAFTA, and he frequently threatened to rip it up completely if Canada, Mexico or Congressional Democrats would not agree to his new rule. He said that was a disastrous trade deal that rewarded outsourcing.

Trump came into office with an executive order drafted to begin the process of withdrawing from NAFTA, but as days went by, his advisers and business contacts repeatedly persuaded him not to scrap the deal. The 25-year-old agreement, which was negotiated by George Bush and signed into law by President Bill Clinton, has since become a political target, mocked for encouraging American companies to move factories and jobs to Mexico.

Many economists have a more positive take on NAFTA’s legacy, saying the deal provided a positive benefit to American wages and employment. It allowed industries to re-organise their supply chains around North America and take advantage of the differing resources and strengths of the 3 countries. The deal tripled America’s trade deal with Canada and Mexico. But the opening of borders has come at a cost. Americans with less education lost out as factories moved to Mexico, taking jobs with them.

The government programs that were meant to help workers adjust to these changes turned out only to be a temporary solution. As China’s 2001 entry into the global economy sped up the loss of American factory jobs, NAFTA became a potent symbol for labour wars, many Democrats and Trump of where American trade policy went wrong.

The Trump administration began re-negotiations of NAFTA in August 2017, saying the pact had ‘fundamentally failed many Americans and needs major improvement.’ Talks were expected to wrap up by the end of 2017, but negotiations carried on to the following year as officials from all three countries scrabbled over issues like dairy-market access and federal-government contracts. The Trump administration also deployed stringent measures with Canada and Mexico, placing tariffs on the steel and aluminium and threatening to tax their cars as well. In the final stages of negotiations, Trump threatened to turn NAFTA into a bilateral deal with Mexico, leaving Canada out entirely since they were at odds over issues like agriculture.

On Capitol Hill, Democrats sought to remind people that the pact would not have won overwhelming bipartisan support without their changes, particularly the updates to labour enforcement. The USMCA deal faces one final hurdle before it can go into effect. It still needs to be approved in Canada. Prime Minister Justin Trudeau’s government’s first action when Parliament resumed was introducing legislation to carry out the trade pact, which it calls the Canada-United States-Mexico Agreement.

Many local and provincial politicians, labour and business leaders are calling for quick approval, making the legislation’s defeat unlikely. Chrystia Freeland, the Deputy Prime Minister, urged the opposition parties to work with the government to pass the bill swiftly. The American farmers may now heave a sigh of relief as Trump has lifted the burden off their backs.

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