How fitting that much of the hand-wringing about the new NAFTA deal (also known as the USMCA) revolves around one aspect of the deal where there’s been some actual improvement over the current NAFTA.
Justin Trudeau “backed down on dairy,” declared the Conservatives Thursday on Twitter, as they continued to advance their argument that the prime minister failed to negotiate a better deal. Dairy farmers, of course, are incensed at Canada’s concessions on supply management, and we’ll now spend several weeks debating how much “compensation” the industry will receive from Ottawa.
It’s true that the U.S. now has slightly more access to the Canadian dairy market — slightly more than was on the table in the TPP, which Donald Trump very quickly abandoned upon becoming president. Of course, what’s seen as a “loss” on dairy could just as easily be seen as a win since consumers stand to benefit.
In fact, the new NAFTA deal also sees the U.S. “backing down” on dairy, peanuts, and sugar. That’s a win for Canadian producers and also for U.S. consumers. You might say that both sides “backed down.” Alternatively, you might just say that this is what trade liberalization is supposed to look like and can we have some more, please?
Beyond that, though, you’d be hard pressed to find examples of how this is an improvement over NAFTA 1.0 — all told, it’s probably slightly worse. However, NAFTA 2.0 doesn’t differ all that significantly from its predecessor, which is most interesting since Trump is celebrating this new agreement despite having described the original NAFTA as “the worst trade deal ever made.” Months and months of drama and bluster and all it took was some minor tinkering in the end.
Our biggest trade threat was the uncertainty around NAFTA, which is to say that our biggest trade threat was Trump himself. Trump had repeatedly threatened to scrap NAFTA altogether, and may have actually tried to follow through on that on at least one occasion.
WATCH BELOW: ‘It’s a good one’ — Trump talks about USMCA replacing NAFTA
According to Bob Woodward’s new book Fear, Trump had ordered a White House advisor to draft a letter immediately withdrawing the U.S. from NAFTA. It was now-former chief White House economic advisor Gary Cohn who intervened, saying that, “I can stop this. I’ll just take the paper off his desk.”
This threat has now been neutralized. Even though the new agreement must be ratified by all three countries, the uncertainty has all but vanished. This is a major achievement, and one worth celebrating.
Even as the hours and minutes ticked down toward Oct. 1, it was unclear whether a deal was going to be reached. Late Sunday night, when Prime Minister Trudeau and his cabinet were gathering in Ottawa, we didn’t know if it was because a deal had been reached or if the NAFTA talks had collapsed. Both seemed like equally plausible scenarios.
It’s much more preferable to be in a position where we can pick apart a less-than-perfect deal than to have to sort through the wreckage and figure out how and why a deal collapsed.
It’s also easy to Monday-morning quarterback and wonder why we didn’t get this or that from the Americans, and it’s difficult to disprove a counterfactual scenario where it’s argued that strategy A would have yielded X, Y, and Z.
It’s true that the Americans seem to have gotten their way on things like intellectual property and pharmaceuticals, but some other U.S. demands — such as a five-year sunset clause or 50 per cent U.S. automobile content — were dropped altogether or softened considerably.
WATCH BELOW: Conservatives call USMCA is ‘Nafta 0.5’ due to concessions
Canada fought to preserve the Chapter 19 dispute resolution mechanism and also managed to convince the U.S. to get rid of the investor-state dispute settlement mechanism in Chapter 11. One can dispute the merits or lack thereof regarding either provision, but these would appear to represent “wins” in that we had to convince the Americans to agree.
Ideally, we could avoided all of this drama and uncertainty. Whatever “modernizing” NAFTA needed could have largely been done through the Trans-Pacific Partnership (TPP), which the U.S. unfortunately walked away from last year. But at the end of the day, we have managed to more or less preserve both NAFTA and the TPP.
The cause of free trade has been advanced, even if true free trade still eludes us. With an erratic protectionist in the White House, this may be something close to a best-case scenario.