Not surprisingly, Donald Trump is boasting loudly about his big new trade deal with Canada and Mexico. He touted the package, now called the United States, Mexico, and Canada Agreement, or USMCA, as “the biggest trade deal in the United States’ history” and promised that it would “transform North America back into a manufacturing powerhouse.”
In reality, there is not much in this package that was not also in the Trans-Pacific Partnership (TPP), from which Trump removed the United States shortly after taking office. And progressives should oppose Trump’s “historic” new trade deal for the same reasons they opposed the TPP.
Before getting into specifics, though, some basics on trade would be useful. Trump routinely refers to trade deals as pacts in which some countries are winners and others (the United States, in his story) are losers. The scorecard is the bilateral trade deficit. By this measure, Trump could denounce negotiators in the Obama, Clinton, and two Bush administrations as “stupid,” since the United States ended up with deals that left this country with enormous trade deficits. But this fundamentally misrepresents our trade negotiators’ agenda.
To take the case of NAFTA, US negotiators were quite explicitly negotiating a pact that would make it as easy as possible for US corporations to set up factories in Mexico in order to take advantage of its relatively low-cost labor. Much of the deal was about establishing rules on investment that ensured US corporations their factories could not be expropriated and that Mexico would not be able to prevent them from repatriating profits back to the United States. We even set up a special extra-judicial process, the Investor-State Dispute Settlement (ISDS) mechanism, which gave corporations an extra safeguard to protect their investments.
Since a major purpose of NAFTA was facilitating the outsourcing of factory jobs to Mexico, we should recognize that the US trade deficit with Mexico is evidence of the deal’s success, not its failure. The same applies to other pacts, most importantly the agreement that allowed China to enter the World Trade Organization.
While the millions of manufacturing workers who lost their jobs in places like Ohio, Pennsylvania, and Michigan were very big losers from China’s entry into the WTO, companies like GE and General Motors, which were doing the outsourcing, were very happy with the outcome. The same applies to retailers like Walmart, which used low-cost supply chains in China to undermine their domestic competitors.
With this background in mind, we can ask who will win and who will lose from USMCA. Here we can pretty much go back to the story with the TPP.
Like the TPP, the USMCA includes a variety of measures that strengthen and lengthen patent and copyright monopolies as well as related protections. This is good news for the industries that benefit from these protections, especially the prescription-drug industry, but it’s bad news for pretty much everyone else.