Everyone knew the North American Free Trade Agreement (NAFTA) was a bad deal. President Obama knew. Hillary Clinton knew. President Trump knew. But only President Trump was willing to use our leverage to push our neighbors to the negotiating table and work out a strong, better deal for the U.S. While previous presidents pandered to other nations in the name of globalization, Trump is pursuing bilateral trade relations which are more likely to put American first and get our workers back on the job.
NAFTA resulted in significant job loss as manufacturing sectors moved to Mexico, wages in the U.S. stagnated while working conditions in Mexico deteriorated as well.
While many American political leaders seemed to agree the deal was bad, former President Barack Obama never followed through on his campaign promise to renegotiate the deal — a promise he made repeatedly in Aug. 2007, Nov. 2007, Dec. 2007, Jan. 2008, and Feb. 2008. Similarly, in July 2016 Hillary Clinton denounced the deal saying it “had not lived up to its promises” and promised to rework it.
Instead, Obama pursued the Trans-Pacific Partnership (TPP) — a deal that included Canada, Mexico, Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia and Japan — and which would have continued displacing U.S. workers and allowing other countries to lead the rules of trade. Obama’s globalist approach worked so hard to bring 11 other nations to the table, it left the U.S. behind. In Jan. 2017, President Trump withdrew from the TPP and plotted a different course.
By renegotiating NAFTA, President Trump has set a new course of smaller, individual trade agreements that work in the U.S. and our partner’s interest. This is already evidenced by the U.S.-Mexico-Canada Agreement (USMCA). For what the agreement lacks in a catchy acronym it seems to make up for in substance.
The deal will require 75 percent of duty-free car content be produced in the region with 40 percent being produced by $16-an-hour labor, this will bring manufacturing back to the US while helping Mexican workers who currently make cars for less than $4-an-hour. U.S. farmers are also expected to see a boost in production as harmful limitations on dairy imports by Canada have been dropped in the new deal.
Following President Trump’s meeting at the United Nations last month, Japanese Prime Minister Shinzo Abe agreed to begin formal trade negotiations with the Trump Administration. This move has been praised by the U.S. Chamber of Commerce and the National Cattlemen’s Beef Association.
Japan was originally part of the TPP, but since Trump removed the U.S. from that deal, Japan can now work with the U.S. directly to form a deal that actually benefits both countries, particularly in the auto industry. According to the White House, the agreement will “For the United States, market access outcomes in the motor vehicle sector will be designed to increase production and jobs in the United States in the motor vehicle industries…”
David Gossack, vice president for Asia at the Chamber of Commerce explained, “As the world’s third largest economy, Japan is one of the most important export markets for American goods and services. These new discussions should help put U.S. businesses on a level playing with our foreign competitors and address longstanding issues between our two nations.”
These bilateral agreements allow each country to get more of what they want than large, multinational agreements.
Last month President Trump signed another trade agreement with South Korea. President Trump explained during the Sept. 24 press conference, “The new U.S.-Korea agreement includes significant improvements to reduce our trade deficit and to expand opportunities to export American products to South Korea… These outcomes give the finest American-made automobiles, innovative medicines, and agricultural crops much better access to Korean markets.”
As part of this agreement, South Korea will also double the number of US cars sold within the country annually.
President Trump also recently announced India is wishing to engage in trade negotiations as well, in order to produce a bilateral agreement with the U.S. Trump has described this as a part of an increasingly broad plan to foster individual relationships with countries. Trump is also moving forward with bilateral trade talks with Brazil.
These agreements play a strategic role in combatting the attempts by China to dominate global trade.
In recent years, China has led the One Belt One Road initiative to connect 70 countries across Asia, Europe, and Africa via trade and infrastructure development. What has been deemed the “new silk road” threatens U.S. global economic dominance, but these bilateral trade agreements provide countries with a more profitable and stable path forward with the U.S. rather than China.
Combined with President Trump trade pressure, the new trade deals put China in a bind. He has placed an additional $200 billion in tariffs on Chinese goods. China retaliated with $60 billion, but the U.S. only exports $135 billion to China, meaning China is almost already out of ammunition.
In an attempt to cheapen exports as a means of offsetting the tariffs, China has decreased the value of the yuan 8.8 percent since the beginning of the year, from $0.159 per $1 U.S. dollar to $0.145.
Americans for Limited Government (ALG) vice president of public policy Robert Romano explained, “Coupled with China announcing a general reduction on certain tariffs, China’s responses so far have been largely defensive and pretty weak. Devaluation and tariffing a limited number of U.S. imports, they’re running out of bullets. President Trump has exposed a major weakness of China’s export-dependent economic model that could compel Beijing to cave and ultimately come to the negotiating table. While Trump’s critics were moaning about a trade war, the President has been carefully ratcheting up pressure to achieve trade concessions, and it is working. The trade deals with Japan, South Korea and now Mexico and Canada signal that they see which way the wind is blowing.”
White House economic advisor Lawrence Kudlow predicts the G20 summit in Buenos Aires will be a good opportunity for China to come to the negotiating table. Kudlow explains, “The great hope here is that China will come to the table and start playing by the rules.” He noted talks thus far have been “unsatisfactory from our point of view.”
President Obama was willing to allow the U.S. to do worse in order to let other countries succeed, Trump proved that bilateral trade agreements can allow everyone to win, even China, that is, if it wants to do a deal.
As for the USMCA and South Korean trade deals, those still need to be passed through Congress, and this will require strict scrutiny to ensure the deal is the best it can be. Americans for Limited Government President Rick Manning explained, “President Trump continues to keep his promises and on first blush, the USMCA looks like a better deal. However, the devil is always in the details, which deserve full scrutiny during the Congressional approval process.”
During the TPP debate, Congress went against the wishes of groups like Americans for Limited Government, which opposed “fast track” legislation in 2015 alongside Trump prior to his campaign announcement, legislation that allowed trade deals to pass both chambers of Congress with a simple majority vote, unlike the two-thirds Senate threshold required for treaties.
Congress went along with it, and now the trade authority extends to President Trump, and he’s taking advantage of it. Now that it has been done, a simple majority can pass USMCA once its details can be verified as favorable.
Officially certifying the USMCA will significantly reduce the damage caused to the American people during the reign of NAFTA and better unite North America. Following this model, President Trump can bring the entire international community together via individual, mutually beneficial trade agreements. The logic is simple: when every country commits to improving themselves, the world improves. This strategy has already proved more impressive than the failed promises of the Obama administration.