Thursday, December 12, 2019

NAFTA 2.0 is allegedly in place. So will we see anything different?

A couple of days ago, House Speaker Nancy Pelosi said that there was enough agreement among Dems to sign off with the White House on a modified US Mexico-Canada Agreement on trade (USMCA).

It was odd enough to see this get announced minutes after Pelosi and other House Dem leaders talked up articles of impeachment against Trump, and I'm not enamored of basically stepping on both events with this announcement. But that's secondary if USMCA works. So, let's see what's in it?

Let's start with a rundown from Washington Post economics writer Heather Long on USMCA, who calls USMCA “NAFTA 2.0”, with some modifications to what already exists. These are the changes that grabbed my eye, and seem more relevant to the Midwest.
The goal of the new deal is to have more cars and truck parts made in North America. Soon, to qualify for zero tariffs, a car or truck must have 75 percent of its components manufactured in Canada, Mexico or the United States, a substantial boost from the current 62.5 percent requirement.

There’s also a new rule that a significant percentage of the work done on the car must be completed by workers earning at least $16 an hour, or about three times what the typical Mexican autoworker makes. Starting soon, cars and trucks must have at least 30 percent of the work on the vehicle done by workers earning $16 an hour. That gradually moves up to 40 percent for cars by 2023.
That seems like an upgrade, and removes some of the advantage Mexico has of lower wages, which seems long overdue. Sure, some companies may try to move production to some other low-wage country, but I think that can be addressed as well.

Another big item of attention in these parts will likely come with dairy products, which got slapped with tariffs by Mexico last year, causing even larger surpluses and lower prices in America for already-strapped dairy producers. Those seem to be diminished in USMCA. To our north, Canada has managed imports and overall milk supplies for several years, and Long says that some of that will be scaled back under USMCA.
Under the USMCA, Canada is keeping most of its complex system in place, but U.S. farmers will be able to sell more “Class 7” dairy products to Canada, everything from milk powder to ice cream. The USMCA also allows more sales of U.S. eggs and turkeys to Canada.
One item Dems (particularly Wisconsin’s Mark Pocan) said he wanted out of USMCA was to reduce the time period that people had to wait to get generic drugs imported. Looks like some of that would happen under the USMCA agreement.
The original USMCA text called for biologic drugs to get 10 years of intellectual property protection. (Canada currently does 8 years.) Democrats say the decade-long provision is gone now. Similarly, the original USMCA granted any pharmaceutical company three additional years of IP protection if it found a new use for an older drug.
Former Russ Feingold press secretary Jud Lounsbury is skeptical about the USMCA, and what seems to be a House Dem strategy of appearing “reasonable and bipartisan” in going along with President Trump on NAFTA 2.0 (or 1.5, as Pocan has called it).

Writing before the final agreement was announced this week, Lounsbury notes in the Progressive that the pharmaceutical industry seemed suscipiously supportive about USMCA before this week, and says the alleged improvements for dairy farmers are dwarfed by the mess that Trump’s original trade wars have caused.
According to the group Public Citizen, big pharma is enamored of USMCA because it “would lock in high U.S. medicine prices,” which are already too high, and essentially “charge more in all three NAFTA countries.”

Meanwhile, Trump’s main stated reason for opposing NAFTA—the outsourcing of jobs to Mexico— remains unchanged in any fundamental way by the new pact. And his second best selling point that it will "greatly open markets" is just silly: Canada has only agreed to open 3.59% of their dairy market and they had already agreed to this marginal increase as part of President Barack Obama’s TPP negotiations.

This nothing burger was secured by Trump in his trade war with Mexico and Canada at great cost to ordinary Americans. Dairy farmers in Wisconsin, for example, were hit hard when Mexico, the U.S.’s #1 dairy export market, imposed steep tariffs on cheese. That contributed to Wisconsin leading the nation in farm bankruptcies.

But Trump needs a campaign promise trophy and corporate Democrats are desperate for some big pharma campaign cash.

Everybody wins, except the American people.
> I have to see the full details and more text to have an idea if we’ll truly be better off under NAFTA 2.0…errrr…USMCA, and if so, by how much. But all I see this agreement (and any China agreement) doing is providing an excuse pump up Wall Street for a couple of days with baseless optimism, while ignoring the clear declines in both agriculture and manufacturing that are going on now.

Would I vote for it if I was in Congress? Maybe, as it seems a slight improvement from what we have now. But I have a hard time buying that it’ll come close to removing the damage to blue-collar work that has been done to the Midwest over the 25 years that NAFTA has been in effect. Nor will it bring back the 2,000 dairy farms that have closed since Trump was elected.

I do think USMCA can lead to a better scenario for Dems. They can debate this agreement in the House before Christmas, and it could be a good excuse to let impeachment marinate for the next month. Instead, it looks like they want to jam everything in for some reason, which makes all of these important events blue in people's minds, and doesn't give Dems nearly as many benefits they might get if they could get people to focus on individual items instead of wading through the firehouse of BS that makes so many shut down these days.

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