The New NAFTA: Making Matters Mostly Worse

Since its implementation in 1994, NAFTA has been roundly criticized by nearly all North Americans to the left of Clintonian liberalism. The North American Free Trade Agreement freed flows of capital, ratcheted up deregulation, and introduced a variety of other pro-corporate measures. Meanwhile, the agreement did nothing to address pollution, labour standards, or consumer protections. The Economic Policy Institute and a host of others have meticulously documented the many ways that NAFTA was bad for working people from all three countries.

During the 2016 US presidential election, Donald Trump consistently campaigned on the promise to renegotiate NAFTA and withdraw from the agreement should negotiations fail. He argued that NAFTA was the “worst trade deal ever” and that he would “make America great again” with a nationalist renegotiation that would bring back quality jobs and ensure that the US stopped getting “ripped off”.

Not surprisingly, the subsequent negotiation process was long and fraught, with multiple deadlines missed. President Trump repeatedly threatened his trade partners: with the possibility of exiting the agreement entirely, with imposing tariffs on Canada, and finally with negotiating separate bilateral deals with the two countries. In fact, as a result of this rancour much of the late-stage negotiations were conducted between only Mexico and the US, with Canada bitterly accepting a “take it or leave it” offer at the very last moment.

The United States-Mexico-Canada Agreement, or USMCA, was finally agreed by the three countries on 1 October 2018. It will likely be signed by the end of November—perhaps at the G20 Summit in Buenos Aires—with congressional ratification tentatively scheduled for early 2019. A Democratic victory in the upcoming midterm elections could delay this plan, but most informed observers believe that the deal’s measures will have gone into effect by 2020.

The Bad

The first thing to note is that, with few exceptions, the USMCA is not radically different from its predecessor. That is a bad thing. It continues to be oriented around corporate power and capital accumulation. And just as NAFTA ushered in a generation of terrible trade agreements, there ought to be real concern that the USMCA provides political coverage for the next generation of one-percenters hungry to pad their bank accounts at the expense of ordinary people.

Diving into the particulars, one prominent change concerns intellectual property and digital trade. A number of increased protections have been agreed, for example the extension of copyright terms from 50 to 70 years beyond the life of the author. However, the most widely-discussed (and criticized by the left) update is the extension of data protection terms (i.e., market exclusivity) for biopharmaceutical medicines from eight to ten years, thus delaying the entry of generic drugs into the market and likely raising drug costs across the trade bloc.

According to Public Citizen’s Peter Maybarduk, the updates in this area “go significantly beyond the original NAFTA text in their government-sponsored patent and exclusivity protections for corporate monopoly control over needed medicines. Their purpose is to better insulate expensive new medicines from generic competition; helping pharmaceutical corporations keep the prices of at least some new medicines higher for longer.”

Meanwhile, the USMCA’s new digital trade provisions have probably been the least-examined aspect from a left perspective. This is a shame, given that its inclusion in the agreement was one of the principal mainstream selling points for renegotiation. (Remember, e-commerce did not really exist in 1994!) However, from the US Trade Representative’s own website, we learn that the Trump administration is particularly happy about freeing corporate data flows (thus “protecting the global digital ecosystem”), prohibiting customs duties from being applied to digital products, and limiting the civil liability of internet platform for third-party content.

These measures are actually quite similar to those proposed in the Trans-Pacific Partnership, which Trump called off shortly after entering office. They have been lauded as big wins for Silicon Valley, and their ramifications will likely be long-reaching and are difficult to fully predict. What we can say with certainty is that they do nothing to prevent the private sector’s on-going enclosure of the internet commons, and will likely accelerate this deeply troubling trend.

Finally, a few words must be written on the agreement’s treatment of environmental issues. Hadrian Mertins-Kirkwood of the Canadian Centre for Policy Alternatives gives the agreement a modicum of credit for including a chapter on the environment, which will replace NAFTA’s completely ineffectual side-agreement on the issue. However, he continues by criticizing the weak language around climate which, he argues, will likely render enforcement mechanisms irrelevant.

The Sierra Club’s Ben Beachy concurs, arguing that the USMCA “poses even greater environmental threats than the original NAFTA.” Beachy continues, “In short, the deal would perpetuate outsourcing of pollution and jobs, offer special hand-outs to notorious corporate polluters, and extend Trump’s polluting legacy for years after he has left office.”

The Arguably Not So Bad (But Not Uncomplicated)

More mixed in terms of assessments from the North American left has been the area of industrial policy and labour.

Under the new deal, cars and trucks must have 75 percent (up from 62.5 percent) of all components manufactured in Mexico, the US, or Canada to qualify for zero tariffs. Furthermore, the USMCA calls for 40 to 45 percent of automobile content to be made by workers who earn at least $16 per hour by 2023.

This provision specifically targets Mexico and is ostensibly intended to raise wages there in the direction of US and Canadian standards, but it also in principle responds to US progressive arguments, made by Senator Bernie Sanders and others, that bringing up the wage floor in Mexico will promote the “right to stay home” as opposed to being forced to migrate due to economic hardship. (Luis Arizmendi, for one, disagrees that this will provision will in any way serve the Mexican people, in a piece focused on Mexico and published by RLS Brussels.)

Furthermore, unlike NAFTA, the USMCA technically allows each country to sanction the others for labour violations that impact trade through a complex process modelled after similar protections in the TPP. However, much as with the abovementioned environmental measures, there is widespread doubt among progressives whether the political will to enforce these measures will actually arise.

Nonetheless, some, like United Steelworkers President Leo Gerard, are cautiously optimistic: “In the area of workers’ rights, the draft text we have seen includes significant improvements over the existing NAFTA and is stronger than the rejected Trans-Pacific Partnership (TPP). It goes farther than any prior trade agreement. That is encouraging, but it is not yet enough. Efforts to protect the rights of workers in all countries that will be party to this deal are not finished.”

Meanwhile, other unions like the United Electrical Workers have been less sanguine in their assessments. According to the UE: “The USMCA itself offers little to protect US labour rights. It does not require enforcement of international labour standards and principles of freedom of association, such as the right of workers to negotiate union security clauses which enable financial stability to worker organizations and which so-called “right-to-work” laws prohibit. It does, however, include the special deals for banks, pharmaceutical companies, technology companies and the energy industry that are even more corporate-friendly than the provisions for those industries in the rejected Trans-Pacific Partnership.”

Similarly to the fraught discussion around Trump’s tariffs—whether they are terrible or actually not such a big deal—we find a split in the North American left that in some ways mirrors the nationalist/internationalist divide that continues to grow on the European left. This fissure is troubling, particularly because of how explicitly the nationalist wing of the Trump administration has articulated its strategy to build a new political majority that includes working classes, including union members, who have seen their wealth and social status decline in the era of financialized capitalism.

The Really, Really Good (Though Also Politically Complex)

The above paragraph hints already at why the really, really good thing about the USMCA, which you have likely already heard about, is also politically complex and worthy of close examination.

Following months of intrigue around the issue, the USMCA does indeed (mostly) get rid of NAFTA’s infamous Chapter 11 Investor State Dispute Settlement mechanisms, which allow companies to sue countries over policies—usually related to environment and public interest—that could negatively affect profits. ISDS between Mexico and the US will remain only in the energy and a very few other sectors, and between Canada and the US it will be completely eliminated. (In a strange political inversion, it was actually Canada that lobbied the hardest to retain ISDS, despite the fact, pointed out by Maude Barlow and many others, that Canada is by far the most-sued of the three countries under Chapter 11.)

The reasons that a radical right-wing Trump administration implemented one of the principal demands of progressive fair trade campaigners are complex and still somewhat obscure.

For US Trade Representative Robert Lighthizer—an old-school conservative who is by many accounts the least-worst Trump appointee—ISDS serves as a subsidy for American businesses to invest in Mexico. From his perspective, this amounts to a perversion of market values: if these businesses don’t want too much risk exposure, they should recur to secondary insurance markets.

For Lighthizer as well as other, more insidious elements of Trump’s nationalist wing, ISDS is considered a clear violation of American sovereignty. While here we can find superficial similarities to the progressive perspective, we should not for a second forget how this wing of the Republican Party envisions American sovereignty in the area of trade: as a beggar-thy-neighbour schoolyard game in which the US fully intends to act the bully, using its size, its dollars, and its military to get whatever it wants.

To be clear, the North American left should absolutely support the ways that ISDS has been curtailed in the new USMCA. (After all, even a broken clock is right twice a day.) Equally clear is that the international left should take advantage of this strange conjuncture in North American trade politics, by advancing arguments like “if even Trump is against these ISDS measures, how can the EU possibly continue to advance them so aggressively?”

At the same time, we must recognize that the Trump administration’s capture of such a solidly left demand signals a real danger for our politics going forward.

A Brief Political Assessment and Next Steps

President Trump can now credibly tout the renegotiation of NAFTA as a political victory, arguing that he followed through and delivered on his promises. Following his cancellation of the Trans-Pacific Partnership and alongside an escalating trade war with China, the renegotiation of NAFTA makes for a triumvirate of massively consequential trade policy decisions made by the Trump administration.

In each of these cases, Trump has capitalized on popular (i.e., working-class) discontent with rising inequality and declining living standards in the American heartland. He spoke to this pain in football stadiums across the country during his presidential campaign, promising to “make America great again” by putting “America first,” whereas his opponent blithely responded that “America is already great” while rubbing shoulders with movie stars in the Hamptons.

Bernie Sanders (who also campaigned in opposition to free trade deals, but from a progressive perspective) is fond of saying that Trump successfully diagnosed a problem that other politicians ignored, but that his solutions are all wrong. In my judgement, this position is both fundamentally right and also politically savvy.

Instead of summarily dismissing Trump voters as a “basket of deplorables,” the left should recognize that many of them reject free trade agreements for reasons that are not necessarily so different from ours. In a general election against a candidate so associated with NAFTA, Trump was able to make significant gains out of this.

However, there is no doubt that despite Trump’s rhetoric, some narrow sectorial gains, and even the laudable curtailing of ISDS, the USMCA remains an agreement built to further capital’s interests at the expense of working people. Nearly everybody who has been hurt by the last era of financialized capitalism will continue to be hurt by this most recent plot twist, in which neoliberalism weds itself to ascendant right-wing nationalism.

The task for the left is to understand the pain many of these people feel, give them due credit for diagnosing problems that a generation of politicians (Republican and Democrat) told them to ignore, and then propose solutions that will actually benefit them—not at the expense of working people in other countries, but rather by reining in an out-of-control corporate class.

There will be a chance to do this after the upcoming midterm elections, to extract meaningful concessions even if there is not enough power to block the agreement’s ratification. There will be another chance to do this during the USMCA’s built-in, six-year review process. And there will be many other chances in the coming period for us to challenge, and make winning politics, out of the many corporate trade deals like this that ordinary people on both sides of the political aisle have recognized do more harm than good in their daily lives.

About the author: Ethan Earle works as Program Manager for United Nations and North America at the Rosa Luxemburg Stiftung’s New York office. He can be contacted at ethan.earle(at)rosalux(dot)org.

economy, free trade, international relations, neoliberalism, trade