The new North American “trade
agreement” forced on Canada and Mexico comes under the unwieldy moniker “United
States-Mexico-Canada Agreement,” now to be referred to as the USMCA, which
sounds more like a military acronym, which probably suits its intent. Trump’s
new trade deal is not a “done” deal yet since the legislatures of all three
countries are still to approve it, and with the anti-Trump mood in Mexico and
its next legislature likely to be a hostile one along with the likelihood the
Democrats will win at least one house of Congress in November, it remains just
an “agreement.”
But let’s not be kidded by all
the Trumpian and media praise: as CNBC notes, the principle difference between
NAFTA and the USMCA is the name change: U.S. farmers—already long harming
Mexican small farmers—will get just slightly
more access to Canadian markets; 12.5 percent more auto parts must be built in
North America (not necessarily in the U.S.) to sell to the U.S.—meaning fewer
(cheaper) parts from Asia; 40 percent of auto labor must pay $16-an-hour by
2023, not indexed to inflation; and 70 percent of steel parts for automobiles
must also be purchased from North American suppliers. That’s it. The U.S. did cave slightly to charges that it
was out to destroy the economies of Mexico and Canada. According to Reuters,
“Mexico and Canada would each get
a tariff-free passenger vehicle quota of 2.6 million passenger vehicles
exported to the United States annually. Pickup trucks built in both countries
will be exempted entirely, the side-letter said. Mexico will get an auto parts
quota of $108 billion annually, while Canada will get a parts quota of $32.4
billion annually in the event of U.S. autos tariffs. The quotas are
significantly above existing production volumes in each country, allowing for
some export growth.”
In fact, the most “significant”
impact of Trump’s latest “triumph” deals almost exclusively with automobile
production, and it isn’t exactly certain what that impact will actually
be—whether “helping” domestic production or harming consumers with higher
prices; the former may only be a short-term “plus” if the latter nullifies it in
the long term. According to the Washington
Post, “Economists and auto experts think USMCA is going to cause car prices
in the United States to rise and the selection to go down, especially on small
cars that used to be produced in Mexico but may not be able to be brought
across the border duty-free anymore. It’s unclear how much prices could rise
(estimates vary), but automakers can’t rely as heavily on cheap Mexican labor
now and there will probably be higher compliance costs.” Not only that, but
small cars may be no longer be cost effective to build in North America at all,
particularly to export to, say, China. Instead, such cars will simply be made
by cheaper labor in Asia—just as in the apparel and consumer electronics
businesses that the U.S. once dominated.
Unfortunately, all of this could
have been if not avoided, made even more miniscule. As the Eurasian Review noted,
Critics of the Mexican government’s strategy thus consider that, given
President Trump’s time constraints and key Republican districts’ dependence on
continued trade with Mexico, negotiators surrendered the advantages of
multilateralism and submitted to pressure all too quickly. While the
counterfactual is difficult to establish, Mexico may have indeed missed an
opportunity to call President Trump’s bluff and reach a more balanced deal…Thus,
the North American auto sector, now reliant on less-demanding requirements and
frictionless cross-border flows that allow for intra-industry efficiencies,
risks losing competitiveness at a global scale—and thus market share and jobs,
making President Trump’s victory pyrrhic, at least in economic terms.
Of course, “populists” on the
left like Sen. Bernie Sanders will praise the parts of the agreement that
compels higher wages for Mexican workers and the ability to unionize. That’s
all well and good—except who is fooling who here? They are not “cheering” for
Mexican workers’ rights; they couldn’t give a shit about that. They just want
whatever they foolishly think will help themselves. Note also that in Deep
South states, automotive workers are not only not unionized, but largely
prevented from doing so, thanks to Republicans and their lackeys on the Supreme
Court. What racist hypocrisy!
The hypocrisy runs deep. Trump
claimed that NAFTA “hurt” American workers despite the fact that U.S.
unemployment is at “historic” lows. American workers are actually hurt more by
continuing and growing income disparities perpetrated by economic “elites” and
desk jockeys who are given phony ego-inflating job titles, and are vastly over-paid
for what they do on any given day (watching their computer screens, talking to
other people watching their computer screens, snacking, eating, and snacking
again). Trump’s claims that NAFTA “hurt” the U.S. is based solely on trade
deficit numbers; but the absurdity of this is quickly revealed when one
examines the relative size of Mexico and
Canada’s consumer purchasing power compared to the U.S.’. Mexico takes in far
more U.S. goods per capita than American consumers take in from Mexico.
Thus this new “deal” will not increase exports
to Mexico, in fact may reverse it if Mexican auto workers and parts suppliers
find themselves out of work—which of course opens another can of worms. According to a recent article in the New Republic by Erik Loomis, only 20
percent of Mexicans believe NAFTA helped them, and two-thirds believed it was
more beneficial to the U.S.—not just for U.S. agriculture exporting to Mexico,
but for U.S. consumers of automobiles
imported from Mexico. Loomis noted that changing NAFTA to make it even more
beneficial to the U.S. (or more specifically, U.S. economic elites) “creates a
trade system by which Americans reap all the benefits while bottling up all the
problems that system causes south of the border. If history is any indication,
that would have long-term negative consequences for both the United States and
Mexico.” What he is saying, of course, is that hurting the Mexican economy only
creates a greater impulse to leave the country for greener pastures—mainly to
the U.S.
Loomis went to note that while
U.S. farmers already received special protection that contravened the “free
trade” dictum, NAFTA’s impact “was horrible for Mexican farmers, driving them
over the border into the United States. Immigration historians have long noted
that there are push-and-pull factors that send migrants to the U.S. and other
nations, and the biggest push factor for these farmers was that they simply
could not survive on their farms any longer. NAFTA rules facilitating land
privatization allowed American agricultural companies to create U.S.-style
agribusiness operations in Mexico. The U.S. then pulled these people across the
border because of the availability of low-wage jobs here.”
Loomis also pointed out that the
flooding of U.S.-produced corn and other food products into Mexico led to the
loss of more than 2 million agricultural jobs in Mexico. In 1995, pork imports
to Mexico totaled 30,000 tons; in 2010 the U.S. exported over 800,000 tons of
pork to Mexico. Then, “Mexican hog farmers, undermined by NAFTA’s trade
provisions, had to leave their farms to make a living. Many migrated north.
Some of the very farmers displaced in Veracruz were recruited to work at a
North Carolina Smithfield hog-processing plant. When they tried to unionize in
2007, Smithfield had the undocumented union members deported, willing to pay
the fine for immigration violations rather than have a unionized plant.”
U.S. abuses of corn exports,
which is a national staple in Mexico, especially for the country’s poorest, was
a travesty of the cruelest kind. The price of American corn that flooded
Mexican markets was at first relatively cheap, driving an untold number of Mexican
small farmers out of business. But then the price of corn shot up when U.S. agribusinesses
based in Mexico began converting corn into other uses (ethanol, corn syrup),
and the price of corn for food consumption tripled in price, causing a national
crisis that most Americans were blithely
unaware of.
Now, while Trump’s trade “triumph”
has mostly cosmetic differences to the previous trade agreement, it targets the
very avenue that Mexico’s farmers who were driven off their land by U.S.
agricultural trade abuses had sought to survive—in the automobile industry. The
new trade deal does nothing to curb U.S. abuses of NAFTA, in fact not only keeping
them in place but forcing Canadian agricultural markets to be abused, although
to a much lesser extent. With Trump’s intent to drive jobs out of Mexico when
the U.S. is reveling in “historic” employment levels, only a fool cannot see
why people naturally go to where the jobs are.
