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Mon Oct 1, 2018, 05:13 PM

NAFTA 2.0: Multilateral free-trade deals are good after all

By Jennifer Rubin
Opinion writer
October 1 at 1:30 PM

The Post reports on the new and improved North American Free Trade Agreement:

The new treaty, preserving the three-country format of the original North American Free Trade Agreement favored by business groups and congressional Republicans, is expected to be signed by Trump and his Canadian and Mexican counterparts in 60 days, with Congress likely to act on it next year. … “The fact that the administration is so eager to press to a deal, despite [the] statement that he has no intention of renegotiating, suggests that the real quest here is for a deal to wave around during the next month of midterm campaigning,” said Phil Levy, a former White House economist in the George W. Bush administration.

This is a long way from “ending” NAFTA. Indeed, for all President Trump’s shouting (literally) and dissembling (e.g., falsely claiming NAFTA cost us “millions” of jobs), the United States-Mexico-Canada Agreement represents vindication of free-trade principles. This is cynical policy: Declare victory, then abandon the field. Here, Trump has kept the architecture of what is actually one of the most successful trade deals in history after some home remodeling. James Pethokoukis of the American Enterprise Institute writes: “The biggest upside from this newish trade agreement between the United States, Mexico, and Canada — assuming Congress approves it — is that it eliminates the uncertainty caused by President Trump’s threats to withdraw from NAFTA Classic or hit Canada with steep tariffs if it didn’t play ball.” He explains:

The reality is that America has expended a tremendous amount of national political capital for pretty modest changes. The agreement makes even more inexplicable Trump’s decision to abandon the Pacific trade deal given the obvious overlap between the two. (Hopefully, New NAFTA might help nudge us back in.) For instance: The US will have greater access to the Canadian dairy market, but this will maybe mean additional exports of a few hundred million dollars in a nearly $700 billion trading relationship. (As it is, the US exports three times as much dairy to Canada, nearly $500 million, than it imports.) The new deal also makes it unlikely that either Canada or Mexico would be subject to US national security tariffs on cars and car parts with the quotas significantly above current export levels. Nor do the higher rules-of-origin rules seem to affect many vehicles, according to a Bloomberg analysis. Then there’s this: British Columbia can no longer refuse to sell US wines — including one would assume from the Trump Winery in Virginia — at its government-run liquor stores. President Trump has claimed NAFTA 1.0 was the worst trade deal in U.S. history and helped make America a poor country. If so, then it’s hard to see how NAFTA 2.0 changes that status quo.

It will be amusing to see Trump try to sell what amounts to pouring old wine into new bottles. Economists who inveighed against his nonsensical attacks on trade, and on NAFTA specifically, will get the last laugh. (Since Trump clearly doesn’t know exactly what is in old trade deals, he can easily be convinced that the new one bears no resemblance to the “worst deals ever.”) As Pethokoukis suggests, this should be the model for future Trump capitulations. Throw in some tweaks, change the name of the Trans-Pacific Partnership and declare victory. In the same vein, incorporate some bipartisan changes, rename the Affordable Care Act and move on to expanding Medicaid (which can also be reformed and renamed). This tactic also could work for the Joint Comprehensive Plan of Action (a.k.a. the Iran deal). Extend its term, fiddle with the inspection provisions, agree to address Iran’s missile program, come up with new initials and declare it the best Iran deal ever. We all know Trump doesn’t care about anything of substance; his only concern is winning, assuaging his giant ego and avoiding humiliation. Sometimes that leads to awful results (e.g., the non-deal with North Korea that leaves him “in love” with the world’s worst tyrant). But given Trump’s animosity to anything relating to his predecessor, his inability to grasp policy details and the GOP’s dearth of workable policy alternatives, the best we can hope for is the status quo dressed up in a Trumpian bow. “So in the end, the trillion-dollar trading relationship between the three nations will continue and grow,” says Pethokoukis of NAFTA 2.0. “If a decade from now one looks at a chart of trilateral trade flows, there will be no hint that this revision ever took place.” It sure beats a protectionist-induced economic recession.



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