The Trump administration’s overhaul of the North American Free Trade Agreement is both the best trade pact signed by an American president in 30 years and a corrupt mess that offers working people almost nothing.
Almost nothing, according to leading mathematicians, is still more than nothing at all. But as with most of Donald Trump’s trade proclamations, the president’s threats and boasts on NAFTA have obscured a policy agenda that generally reproduces the outrages overseen by the last four presidents. It’s an agreement with Mexico and Canada that has generous protections for Republican-aligned industries, including Big Pharma and fossil fuel polluters; no meaningful environmental protections; weak consumer safeguards; and no mechanism to enforce the moderately improved labor standards contemplated by the deal.
The global trading order built over the past generation has been a comprehensive effort to emancipate global corporations from the laws and regulations devised by the world’s democracies to protect citizens from corporate abuse. The new NAFTA offers clues on how to change that balance of power but does nothing to alter it, as evidenced by the enthusiasm shown for Trump’s new deal by top corporate lobbyists.
“We welcome the announcement that negotiators have reached a deal to modernize NAFTA,” said U.S. Chamber of Commerce President and CEO Thomas Donohue. The Business Roundtable, a lobbying operation that exclusively represents CEOs, said it was “encouraged” by the new agreement. Lobbyists for fossil fuel companies urged Congress to ratify the deal, while trade groups representing tech giants Google and Amazon hailed the deal as a victory for digital commerce. The Pharmaceutical Research and Manufacturers of America, better known as PhRMA, is positively giddy. If you are a corrupt monopolist, chances are Trump’s new NAFTA has something for you.
And yet the modest steps forward on the deal are probably enough to at least divide organized labor ― the most effective source of opposition to recent trade pacts like the Trans-Pacific Partnership. Early reactions from the United Auto Workers, United Steelworkers and the Teamsters have been cautious, refusing to support or oppose the agreement. On Capitol Hill, labor-friendly lawmakers read such equivocation as a green light to side with corporate lobbyists.
Trump’s negotiators got labor to stand down by securing improvements for workers in the automotive sector. Wages at Mexican factories for cars and car parts frequently run around $1 an hour, a far cry from the robust wage growth promised by champions of the original NAFTA deal. Under the new arrangement, factories must pay workers at least $16 an hour for at least 40 percent of the work that goes into each car assembled in Mexico. At least 75 percent of the parts in every vehicle must also be made in North America, up from 62.5 percent in the original NAFTA deal. It’s convoluted and incremental, but a clear improvement.
“The change in autos is significant and real,” noted Brad Setser, a senior fellow at the Council on Foreign Relations. “It is a notable departure from the approach in TPP.”
The other major changes in NAFTA are procedural ― terms that matter more for the precedent they set than any near-term effect on the lives of actual human beings. For political theorists and academics, the Trump administration’s efforts to jettison the Investor-State Dispute Settlement process are a promising development. ISDS panels allow corporations to challenge a country’s laws and regulations before a secretive, unelected international tribunal. They’re a clear affront to democratic sovereignty and serve as a powerful tool corporations can use to block new environmental or public safety rules. Sen. Elizabeth Warren (D-Mass.) has been calling to eliminate ISDS for years.
But the new NAFTA essentially preserves ISDS for oil and gas companies, maintaining the forum as an avenue to stymie new climate change regulations.
Still, if future presidents follow through with Trump’s antipathy to ISDS in general, he will have presided over a meaningful change in U.S. trade policy. His willingness to renegotiate decades-old trade pacts sets a new precedent that other leaders can wield to overhaul the existing model for international trade. The same is true for the new NAFTA’s language on currency manipulation, which doesn’t matter much for countries like Mexico and Canada, which have generally avoided aggressive currency maneuvers, but could matter if taken up in future trade talks with the European Union, China, Japan or South Korea.
But for the most part, Trump’s NAFTA looks a lot like the old NAFTA, only more so. From Bill Clinton to Barack Obama, American presidents have used trade policy to secure intellectual property rules that grant drug companies long-term monopolies, immunizing prices from the constraints of market competition. Despite tough talk from Trump about high drug prices, his NAFTA deal includes a bevy of new intellectual property rights that will put upward pressure on costs.
All of this is in keeping with Trump’s overall approach to trade, which has set higher corporate profits as its only serious objective. His tariffs on steel have proved to be a boon for steel industry magnates but are yet to translate into meaningful gains for actual steelworkers. He rages against China but reserves his most forceful criticism not for labor rights but for intellectual property. Even NAFTA detractors wonder if the new auto sector labor improvements will do much for U.S. workers. Domestic car production has shifted dramatically over the past two decades from the Upper Midwest, where workers have long benefited from union protections, to Southern states with so-called right-to-work laws that undermine unions.
“It’s got a lot of symbolism that sounds good, but will it work? I don’t know,” said Robert Scott, an economist at the left-leaning Economic Policy Institute who has long been critical of U.S. trade policy. “It could cause auto companies to simply outsource more production, and it might cause an even bigger shift to the nonunion South.”
Some things, however, are certain.
“What is really clear is that it’s going to make pharma and oil companies even richer.”
Clarification: This article has been updated to clarify the new wage structure for cars assembled in Mexico required by the trade agreement.