A trade victory for TrumpBy STAFF,
Congratulations to President Trump, whose negotiators have worked out an upgrade to the North American Free Trade Agreement without fracturing relations with the United States’ two neighbors and business partners.
The pact gets a new name: USMCA, for United States-Mexico-Canada Agreement, along with predictions from the president Monday that it would bring back plenty of factory jobs to the United States.
There certainly is the potential for that. One of the key components of the new agreement, scheduled to take effect in 2020 if all three nations approve, requires 75 percent of a vehicle’s components to be manufactured in North America for it to cross a border with no tariff.
The current requirement is 62.5 percent.
The main question, which may not be answered for a decade, is whether this change will encourage manufacturers to hire more people — or move even more rapidly toward automation, which would blunt any employment gains that do occur.
Another part of the new agreement says 30 percent of assembly work on a vehicle must be done by people earning at least $16 per hour. That moves up to 40 percent by 2023.
In the short term, this will reduce jobs in Mexico, where autoworkers typically make only one-third of that $16.
Presumably, the U.S. benefits. But if manufacturing expenses increase in North America, it could reduce the number of vehicles built here for export.
There are other things to like about USMCA (it will take a while to get used to the new name).
The U.S. will have more access to Canada’s dairy markets. Mexico and Canada received “side letters” in which the U.S. will allow the two countries to avoid auto tariffs.
Intellectual property protections are improved. Labor rights and environmental rights are upgraded.
Some work remains.
Canada is rightly upset about Trump’s 25 percent tariffs on steel imports from the north.
The president, having gotten much of what he wanted in the new agreement, should stop using these tariffs like a sledgehammer on one of his country’s most reliable political and business allies.
In the end, from the viewpoint of Americans, this agreement will come down to one thing:
Will the number of manufacturing jobs in the country increase?
Right now, it’s impossible to tell.
Remember back in the early 1990s, when President Clinton and free-market Republicans worked together to pass NAFTA over the objections of people like Ross Perot, who predicted “a giant sucking sound” of jobs lost to Mexico?
As it turned out, American jobs went to plenty of other places along with Mexico. The question now is how many will come back.
In any case, it’s a big win for the president, and it comes at the perfect time, just a few weeks ahead of the midterm elections.
Redoing NAFTA, or getting out of the agreement, was one of his big campaign promises.
Assuming Congress goes along, he has delivered.