The Wall Street Journal reports Trump Aims to Model New Trade Deals on Revised Nafta.
> U.S. Trade Representative Robert Lighthizer called the new North American trade deal a “paradigm-shifting model” of American policy that sends a tough message to the rest of the world.
> The underlying principle, as Mr. Trump himself said in unveiling the North American accord this week, is that trade partners should consider it “a privilege for them to do business with us.”
> Whether the Trump team can replicate the new pact’s terms elsewhere is unclear. The White House had unusual leverage over Canada and Mexico with its threats to blow up a quarter-century-old pact that their economies had come to depend on.
}The EU and Japan have no such existing trade pacts with the U.S., so have less to lose. Indeed, they see their own burgeoning free-trade-zones—an EU-Japan pact that doesn’t include the U.S. and the 11-nation Trans-Pacific Partnership from which Mr. Trump withdrew the U.S., both taking effect next year —as giving them leverage by putting U.S. exporters at a disadvantage.
> But the Trump administration seeks to add clauses in future deals that allow the U.S. to withdraw if a trade partner forges a separate deal with a “nonmarket economy”—a clear reference to China. That could force Britain to choose between Washington and Beijing.
Three Delusional Ideas
- Trade is a "privilege"
- Countries will accept terms with the US that demand other countries to not trade with China
- USMCA is a “paradigm-shifting model”
On October 1, I mocked the notion of point number three in Trump Hails "Single Greatest Agreement Ever Signed"
What did it do?
There are two ways to look at things.
- It prevented an absolute tariff disaster
- Hardly anything at all
Both viewpoints are valid. Canada is the US' largest export partner and Trump came remarkably close to blowing up trade with Canada.
However, the revised deal is nearly identical to NAFTA. It hardly did anything at all.
That was not only my conclusion but that of WSJ writer Greg Ip as well.
Limits of America First
On October 3, Greg Ip penned New Nafta Shows Limits of ‘America First’.
His opening gambit was nearly identical to mine.
> To free traders, the new Nafta is a bitter pill to swallow. It introduces managed trade to autos, waters down the foreign rights of corporations and normalizes national security as a pretext for tariffs. Many of its improvements, such as on intellectual property and labor rights, were already in the 12-nation Trans-Pacific Partnership, from which President Donald Trump has withdrawn.
> But the verdict is different when judged by a different standard—how the world’s trading system survives the most protectionist U.S. administration in memory. ....
> n the end, the new U.S.-Mexico-Canada Agreement looks a lot like the old Nafta. Mexico’s only significant concession was on autos and parts: rules requiring more production in North America, higher wages for workers, and potential tariffs if its exports to the U.S. exceed 2.6 million vehicles.
> Yet these auto rules may have little practical significance.
Greatest Single Agreement
So here we are: Trump Hails "Single Greatest Agreement Ever Signed" a deal that does nothing, but at least it didn't destroy anything and everything.
That is the new standard for "greatness".
One of my readers cleverly phrased it this way: "The art of the deal is more important than the deal itself."
Mike "Mish" Shedlock