NAFTA with a New Name

The Trump administration successfully negotiated an updated North American Free Trade Agreement with modernized provisions, concessions of value to farmers and automakers and, of course, a new name. However, politics could still undermine the deal when it goes to Congress and consternation remains among trading partners with continuing Trump tariffs on steel and aluminum.

The Trump administration successfully negotiated an updated North American Free Trade Agreement with modernized provisions, concessions of value to farmers and automakers and, of course, a new name. However, politics could still undermine the deal when it goes to Congress and consternation remains among trading partners with continuing Trump tariffs on steel and aluminum.

The Canadians agreed to final terms for a $1.2 trillion North American free trade agreement that gave President Trump a political triumph and NAFTA a new name. However, the deal doesn’t end a simmering trade war sparked by US tariffs on steel and aluminum and still faces a treacherous political road to passage.

Trade experts gave credit to the Trump administration for completing a three-way deal to update the 25-year-old trade that candidate Trump derided as terrible. Trump critics note the new trade pact is largely the same car with a rebranded nameplate to appease Trump. Peter Navarro, Trump’s trade adviser, said the foundation remains, but the superstructure is superior. 

The United States-Mexico-Canada Agreement (USMCA) still must be approved by Congress, which seems more likely after cliffhanger negotiations with Canada prevented Trump from submitting just a bilateral agreement with Mexico. The agreement also must be ratified by the respective legislative bodies in Canada and Mexico.

Most everybody agreed NAFTA needed a refresher, if for no other reason to account for a phalanx of digital industries and e-commerce that didn’t exist when it was signed. There also was a push to strengthen intellectual property protections, the underlying issue that has sparked a Trump-inspired trade war with China. There are reportedly 63 pages worth of provisions that address patents and trademarks, including two additional years of protection for biologic drugs, which Trump hailed as a key to US medical innovation.

A major sticking point was Canada’s barrier that prevents US dairy farmers from penetrating their market. The Canadians traded some of that protection to retain a trade dispute resolution provision that Trump wanted to scrap. Somewhat ironically, Canadians had agreed to a similar sized dairy concession in the Trans-Pacific Partnership, which Trump abandoned when he took office.

Domestic car manufacturing was a core reason why Trump pushed for a better North American trade agreement. The agreement reached earlier with Mexico increases the North American auto content requirements and requires more content from higher paid autoworkers to qualify for duty-free treatment. AFL-CIO leaders withheld their support for the change, saying they doubted the higher wages and better working conditions in Mexico can be enforced. The USMCA effectively requires unionization of Mexican autoworkers, which runs counter to state-level right-to-work laws, which political conservatives have pushed for in the United States.

Economists fret that higher wages will make North American vehicles more expensive and less competitive against vehicles imported from overseas, which face a nominal tariff. Trump is pledging to address the import tariff and potentially replace it with quotas. There also is a side letter to the agreement that preserves Trump’s ability to impose tariffs on automobiles assembled in Mexico or Canada. 

Trump sought a 5-year sunset clause on the deal. In the final agreement, the USMCA has a 16-year life span, with a review after six years.

A key element of the deal for the incoming Mexican president is a clause that restates Mexico’s claim of ownership of all hydrocarbons in its subsoil. The provision doesn’t prevent foreign companies from producing oil in Mexico.

While agreement on NAFTA modernization brought sighs of relief, there is still consternation over steel and aluminum tariffs – and their rationale: protecting US national security. The pretense for the tariffs has irked Canadians who don’t view themselves as security risks to the United States.

Looming elections that could flip control of the House to Democrats might complicate approval of the USMCA. Democrats may not want to bless a Trump achievement before the 2020 presidential election and Republicans may decide to poke the eye of unions, which have been a major force behind revamping NAFTA. That could leave the USMCA an agreement without a country and further muddy the waters on US trade policy.


Re-imagining 21st Century Labor Unions

Labor unions have seen their membership and political influence wane as corporate influences have swelled, leading to provocative ideas for a new type of union that represents the political interests of a community of workers.Labor Day was celebrated by the usual picnics and political speeches. But it also drew two intriguing op-eds that pointed to a broader and different role for labor unions in the quest to retain a working middle class in America. 

Both opinion pieces called for labor organizations that extend beyond bargaining for wages and benefits. They urged community-based organizations that would serve as the political voice for low- and middle-class workers as a counterbalance to well-heeled corporate influences in politics and governance.

"The union movement is not going to rebuild the middle class in the 21st century with a system of labor laws that were designed for factory worker in the 1930s and copied for government workers in the 1970s," wrote Tim Nesbitt, a former president of the Oregon AFL-CIO and senior advisers to Governors Ted Kulongoski and John Kitzhaber.

In his op-ed appearing in The Oregon, Nesbitt said, "Today's realities require looking beyond the traditional bargaining units composed of jobs of a single employer at one or more work sites, which are no longer effective for advancing the interests of large numbers of workers in the job churn of the private sector."

Guest Workers Barrier to Immigration Reform

Influential U.S. senators toured border security facilities in Arizona this week. However, the battle over comprehensive immigration reform may already have migrated to how to deal with guest workers.

In their tour, senators witnessed the apprehension of a woman who tried to scale an 18-foot tall fence. Chances are their private conversations during the trip centered on how to find common ground between the views of the U.S. Chamber of Commerce and the AFL-CIO on guest workers. 

Organized labor wants to avoid a flood of new workers that elbow aside Americans for jobs or erode U.S. wage rates for lower-skill employment. The Chamber says an influx of immigrant workers will fill vacant jobs, especially in agriculture, and add productivity to the U.S. economy by providing a source of lower-cost labor.

The knot of senators working on immigration reform, which includes Arizona's two Republican senators, John McCain and Jeff Flake, had hoped to have a consensus measure ready for Senate consideration in April. In the world of politics, it is best to deal with controversial issues as far away as possible from the next election. As time drifts on, more Members of Congress may get cold feet.

Differences over a guest worker program scuttled immigration reform in 2007 and represent a major obstacle to a compromise this year, despite an alignment of political stars in which both Democrats and Republicans want to win points with swelling numbers of Latino voters.

According to Bloomberg News, Democrats have proposed to allocate 10,000 visas annually for low-skilled workers, in a manner similar to how visas are issued to high-skilled workers, with a maximum cap of 200,000 visas. Republicans, led by Florida Senator Marco Rubio, call that idea cumbersome and unworkable. Business interests have called for a program that issues 400,000 guest worker visas.