Trump NAFTA, USMCA, Mexico, Canada, trade deal: NAFTA with bells and whistles

President
Donald Trump dons a red “Make America Great Again”
hat
Jae C. Hong/AP
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• Officials reached the US-Mexico-Canada Agreement after
  a year of negotiations Sunday.
• President Donald Trump portrayed it as a groundbreaking
  pact. 
• But analysts say the new agreement isn’t too different
  from the original NAFTA deal.

While President Donald Trump hails a
revised NAFTA as the “most advanced trade deal in the world,”
some analysts are wondering what all the hype is about.

Officials reached a breakthrough on the US-Mexico-Canada
Agreement in 11th-hour negotiations Sunday night, calming fears
that the trilateral deal could be scrapped when a self-imposed
deadline hit hours later. But analysts say the new deal doesn’t
look very different from the trade dynamics that have governed
the US and its neighbors for decades.

“New deal, with a new name, but aside from dairy access and some
bells and whistles, hardly a major rewrite that warranted so much
wasted time over a 13-month long period of negotiations,” David
Rosenberg, chief economist at Toronto-based Gluskin Sheff, said
in a note sent out to clients. 

To be sure, USMCA resolves previous sticking points and includes
major concessions from both sides. For example, it opens up about
3.5% of Canada’s protected dairy market to US farmers and allows
Canadians to purchase five times the amount of foreign products
online without paying an additional import tax.

But Eric Winograd, a senior economist at
AllianceBernstein, thinks the changes are “entirely trivial” from
a US perspective. “If those sound like small numbers
it’s because they are,” he said. “There is no reason to change US
economic forecasts as a result of the deal. No doubt the
Administration will herald the accord as a game-changer, but in
economic terms it certainly is not.”

Building on a previous agreement between the US and Mexico, USMCA
also revamps production standards for automakers across the three
countries. Under the new agreement, three-quarters of
a car’s parts must originate from North America in order to be
exempt from duties. It also offers Mexico
and Canada partial protection from broader auto tariffs the Trump
administration has threatened to impose, but falls short of
marking those countries exempt. 

“To me it seems like it’s a stonewashed and ripped NAFTA,
if you will, rather than a modernized agreement,” Hugo Perezcano
Díaz, a director at the Center for International Governance
Innovation and a former trade official for the Mexican
government, said. 

Still, USCMA represents a major victory for President Donald
Trump, who has vowed to rewrite global trade relationships since
the campaign trail. It won early approval from
businesses and lawmakers across the aisle and even put the
Republican administration in a rare alliance with labor
unions. 

The new agreement also signals the Trump administration is open
to keeping trade agreements with some countries alive, analysts
say, although most fell short of including China in that
list. 

“In a sense, we look at this as something that does have a
constructive message both for North American trade and for fears
around trade wars more broadly,” Bruce Kasman, a JP Morgan
economist, said. “What we wouldn’t do is extrapolate this to the
US-China relationship.” 

Negotiations between Washington and Beijing remain
deadlocked after 
the Trump administration
followed through with another round of import taxes on Chinese
goods last month, leading to retaliatory tariffs and the
cancellation of high-level trade talks. 

“The US relationship with China is much more complicated than its
relationship with Canada,” Rosenberg agreed. “And of course
the stakes are considerably higher when dealing with China — the
Chinese have leverage over the US that Canada simply doesn’t
have.”