The Name Game: Out with NAFTA, in with the USMCA

After the late Sunday announcement that Canada, Mexico and the United States have reached a new trade deal, Kim Richard Nossal asks: Did it all come down to the name? 

By: /
October 1, 2018
NAFTA
US Trade Representative Robert Lighthizer holds a "Trump Playbook" document at the White House on October 1, 2018. REUTERS/Leah Millis

As the details of the new North American trade agreement roll out, we should not be surprised that at the end of the day, it all came down to the name.

For we already knew that US President Donald Trump knows nothing about the actual details of America’s trade agreements, and cares even less. We already knew that the president came to office in 2017 with a completely closed mind on trade. Animated by seventeenth century mercantilist ideas about trade deficits, all Trump seems to know for sure is that the deficits in merchandise trade are always and automatically bad, and that all existing trade agreements, particularly multilateral agreements like the North American Free Trade Agreement (NAFTA), that produce such deficits are therefore likewise always bad. Moreover, Trump has proven highly resistant to efforts of economic experts to school him in the realities of the contemporary global economy. He simply dismisses any other perspective on trade put to him: “I don’t want to hear that,” Bob Woodward quotes him as responding to Gary Cohn, his short-lived director of the National Economic Council, in Woodward’s new book, Fear: Trump in the White House. “It’s all bullshit.”

So, when Trump announced on August 27 that an agreement had been reached with Mexico on a new trade deal to replace the NAFTA he hates so much, we should not have been surprised that the most important part of the announcement was not the details of the agreement, but rather what the agreement would be called. “We’ll get rid of the name NAFTA,” he told the press, because it “had a bad connotation because the United States was hurt very badly by NAFTA for many years.” According to Trump, it would be the “US-Mexico trade agreement,” to which Canada, he said, might be added. (It did not seem to occur to Trump that the new name he had just pulled out of the air would be the abbreviation already being used by the United States Marine Corps — USMC.)

Such considerations obviously do not matter to Trump. When Canada was added as a result of the agreement reached at the eleventh hour on Sunday, the agreement was called the United States-Mexico-Canada Agreement (USMCA). And with that, after nearly 14 months of tense negotiations, we now have a newly named regional trade agreement.

If NAFTA is indeed replaced by the new agreement, which unfortunately is completely unpronounceable as an acronym, it is unlikely that there will be large and dramatic changes to North American trade.

Rather, the new agreement is being widely described as a “NAFTA-minus”: a regime not as free as NAFTA had been, particularly in the automotive sector, but still very much in the interests of all three countries — and definitely better than no deal.

"All that will matter is that Trump will be able to lie to the gullible but adoring crowds at his political rallies that NAFTA is now gone."

In the end, it turned out that all of the uncertainty and drama of the NAFTA renegotiations was likely all about satisfying the president’s deeply entrenched antipathy towards NAFTA. Despite the president’s bluster, the US proved unable to bully its trade partners, either separately or together, into submission on any of its initial “America First” demands.

On the contrary: the Mexicans and Canadians proved to be wily negotiators. The Mexicans got the Americans to abandon their deal-killing demand for a short sunset clause and to secure an American compromise on rules of origin and regional value content for automotive production. For their part, the Canadian side deftly recognized that in the final analysis the Trump administration needed a “win” on this file more than Canada did, particularly with the November mid-term Congressional elections just weeks away. Canada was able to get the American side to back away from their harshest demands (such as eliminating the dispute resolution mechanism in NAFTA’s Chapter 19) and secure agreement with only modest Canadian concessions (such as partially opening up Canada’s protected dairy sector).

Ironically, some of the concessions secured by the US side are not unlike those that had been already agreed by Canada, Mexico and the previous US administration of Barack Obama under the Trans-Pacific Partnership, the free trade agreement that the Trump administration dumped on its first full day in office in January 2017.

However, this being 2018, none of the actual details of the new agreement will really matter, certainly not to the president himself. All that will matter is that Trump will be able to lie to the gullible but adoring crowds at his political rallies that NAFTA — that “horrible, horrible disaster” — is now gone, thanks to his toughness, his far-sighted leadership, and his consummate skills as a negotiator and a deal-maker. Thanks to him, he will say, the Mexican “rapists” have been tamed and the “very unfair” Canadians have been brought to heel. MAGA!

For Canadians, Mexicans and indeed Americans, the upside of this agreement is that if Trump is able to declare victory — and actually willing and able to follow through on this new agreement, which still needs to be ratified — some degree of normalcy is likely to return to North American economic life. Perhaps to show his appreciation, Canadian Prime Minister Justin Trudeau should consider pulling a Kim Jong-un: send the president some “beautiful letters” in the hope that Trump will fall in love with his northern neighbour again.