The Globalization Myth by Shannon K O'Neil

Author:Shannon K O'Neil
Language: eng
Format: epub
Publisher: Yale University Press
Published: 2022-01-15T00:00:00+00:00

USMCA: NAFTA for Populists

The renegotiated rules that came into effect in 2020 aren’t going to significantly move North America’s economic ties forward. The United States–Mexico–Canada Agreement (USMCA), the new NAFTA, brings some advances, to be sure. NAFTA was designed before Google, Amazon, or smartphones existed. The new deal sets up rules of the road for data, downloads, and personal information. It updates intellectual property rights, extends copyright and trade secrets protections, and doubles down on ways to combat counterfeit goods, bringing the quarter-century-old agreement in line with newer ones around the world. It takes small steps to streamline the ways medicines, makeup, and chemicals are tested and approved and lowers the number of sanitary checks for foodstuffs. Customs too should get easier as they go more digital. New provisions to ensure better labor standards should help workers, especially in Mexico. And with strong support from both Republicans and Democrats in the United States, it cements preferential trading ties with Mexico and Canada.

But the new agreement threatens to put out NAFTA’s regional spark. It ups the protective ante for autos and their parts, making it more, rather than less, complicated and costly to comply. More parts suppliers will have to trace and certify the origin of each and every input if they want tariff-free access to North American markets, adding paperwork and costs that are particularly onerous for smaller companies. Many may just decide not to bother (especially for cars, for which the tariffs are low anyway), opening the option of importing more rather than fewer parts from farther away.

The USMCA undercuts legal assurances for U.S. and Canadian manufacturers that set up shop in Mexico. Companies will now have to resolve disputes through local courts that have not always been known for their fairness. It stipulates its own end after sixteen years (pending renegotiation). And the whole benefit of certainty that the agreement was supposed to bring was quickly upended: within weeks of USMCA’s start, Trump imposed tariffs on Canadian aluminum. The acrimonious negotiations and then blatant disregard for the spirit of the new agreement have revived an old wariness between the nations, an unfortunate return given the boost that North American production brings to economic competitiveness.

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