July 7, 2020 3:46PM

The Politics of Renegotiating NAFTA

Mexican president Andrés Manuel López Obrador will be coming to DC tomorrow as part of a White House event related to the renegotiation of NAFTA into the USMCA (U.S.-Mexico-Canada Agreement). The USMCA entered into force on July 1, and as my colleagues have indicated, there’s actually not all that much to celebrate. What we have tomorrow, then, is an event based on political theater more than on policy. The celebratory press conference was as much of a goal as the new agreement itself. We should be happy that Trump did not try to withdraw from NAFTA, but we should be uncomfortable with the way the NAFTA renegotiation took place, and also with some of the USMCA results.

In terms of that political theater, President Trump is excited to claim a political victory, but whose political victory is it? Is it Trump’s or does it belong to the House Democrats who pushed for last minute changes to the agreement? As this article from Inside U.S. Trade notes, the Democrats who were involved think they deserve the credit:

Former Vice President Joe Biden should focus on trade policy during the presidential campaign trail and tout the U.S.-Mexico-Canada Agreement as a win for his party, not the Trump administration, a lawmaker key to the renegotiation of NAFTA told Inside U.S. Trade this week.

President Trump is touting the deal as the fulfillment of his 2016 campaign promise to shake up U.S. trade policy and get rid of NAFTA. In a June 20 Tulsa rally, Trump said his administration was “enacting fair trade deals that finally, after all these years, put America first.” He later told a crowd in Wisconsin that his administration “got rid of the worst trade deal ever made in the history of mankind,” referring to NAFTA. “Under this administration, you know that American workers like you are a national treasure,” he said, touting USMCA.

But Rep. Jimmy Gomez (D-CA), who was appointed by House Speaker Nancy Pelosi (D-CA) last year to lead labor talks in USMCA negotiations with the Trump administration, said Biden could score points in the campaign by focusing on trade.

“To the Biden campaign directly I said ‘Do not run away from trade; lean in to trade,’” Gomez said in a July 1 interview. “Leaning into trade is not only a way to build the economy but also, how do you protect workers’ rights? How do you protect the environment? How do you advance other goals instead of just looking at how much you grow the GDP of the country?”

The political messaging here is going to be really interesting. Over the course of the next several months, we may or may not see much in terms of changes as we transition from NAFTA to the USMCA (though businesses can expect a lot of new paperwork). Perhaps automakers will increase the wages of auto workers in Mexico, which at some point will lead to higher car prices for consumers, although it’s hard to say exactly when given the current economic climate. And perhaps we will see some trade enforcement actions, for example against Mexican restrictions on biotech products, but those will take a while to play out. What we may see more quickly in terms of disputes is litigation related to the denial of labor rights in Mexican factories. There was an innovation in USMCA, pushed by the House Democrats and never before seen in a trade agreement, that targets the labor practices of specific factories directly, rather than the traditional approach of challenging a foreign government for not enforcing its laws or complying with international agreements. If these cases come, it will be interesting to see how Biden and Trump try to take credit. It’s easy to see how a Democratic politician like Biden can talk up labor rights. Does Trump even know how to do that, and would he bother trying? We’ll find out.

All of this emphasizes the point made earlier by my colleagues: the USMCA is not really about free trade. We already had mostly free trade under the NAFTA. Some updates to deal with digital trade issues were certainly needed, and Canada opened up its market to a few more dairy and other agriculture products, but many of the other changes were about either the Trump administration or the House Democrats pushing other priorities. From the perspective of trade liberalization, both sides should be trying to avoid the blame for USMCA. But politicians often think more about politics than policy, and both sides will likely be pushing a narrative that this was a win for them.

My guess is that the details will be so hard to follow for most voters that it will all be a wash in terms of U.S. politics. The average person will have a lot of trouble sorting through the different claims. Trump will assert that the USMCA is a victory for him, without offering any details. Biden may respond that the Democrats made major changes, so it’s really a victory for them. Any voters who are truly undecided at this point are unlikely to be swayed by any of this. But political theater is part of politics, so the show will go on tomorrow at the White House regardless, and it will be a few months before we find out what the changes from NAFTA to the USMCA actually mean in practice.