In view of the many changes in the economy the past 25 years, the North American Free Trade Agreement needed an update. Which is what President Trump and his counterparts in Canada and Mexico delivered last fall. Most important, they did so by preserving the core of an agreement that has benefited all three counties, expanding the flow of goods and services across borders and bringing efficiencies to supply chains, a development that has enhanced the global competitiveness of American automakers.
Now comes completing the work. That means Congress giving its approval. Canada, understandably, may be waiting to see what happens on Capitol Hill. Mexican lawmakers ratified the accord in June.
As U.S. Rep. Troy Balderson, a Zanesville Republican, recently told Jessica Wehrman of the GateHouse Washington Bureau, the trade agreement plays “a pivotal role” in the Ohio economy. More than 50 percent of the state’s exports go to Canada and Mexico, involving nearly 4,000 manufacturers. Ohio farmers have gained from wider access to markets. Thus, ratification would send a reassuring signal, in contrast to the damage many farmers face in the trade dispute with China.
The president long has called NAFTA “the worst trade deal in history.” The updated version, negotiated by his team, confirms that such talk has been bombast. That hasn’t stopped the president from seeking to brand the United States-Mexico-Canada Agreement as dramatic change. Yet the changes, though important, are relatively small. For instance, to qualify for zero tariffs, 75 percent of a car’s components must be made in North America. The current share is 62.5 percent.
That easily could lead to somewhat higher car prices. It also may mean more work performed on the continent.
By 2023, 40 percent to 45 percent of car parts must be made by workers earning at least $16 per hour. American dairy farmers gain more access to Canadian markets. The updated agreement, as expected, covers digital goods. It improves protections for intellectual property. It includes a sunset clause, at 16 years, with provisions for conducting a review after six years, at which time the countries could extend the agreement.
That last item risks a troubling degree of uncertainty. Yet taken as a whole, the update rates as an improvement, as much as anything for securing the framework of the original deal. Bear in mind what Ian Sheldon, an Ohio State economist, told Jessica Wehrman: The collapse of the trade agreement would cost the country $12 billion in lost exports.
Any such deal is the product of a negotiation, and not just among the countries, with business and other interests making their cases. As a result, the product has flaws. Congressional Democrats cite a lack of enforcement concerning provisions protecting workers and the environment. Pharmaceutical manufacturers get extended protection from generic drugs. The hope is Nancy Pelosi, the House speaker, will prove true to her comments about wanting to find a path to approval. That means working with the White House to bridge differences.
No doubt, the president, prone to impulsiveness, can make the task more difficult, whether in roiling things through offensive tweets aimed at four female and nonwhite House members or threatening to impose tariffs on Mexico as part of bullying to get his way on immigration. Yet it is crucial to keep the trade agreement in perspective.
Research shows it has contributed far less to job losses than automation has. More, a strong argument goes that the country has not responded well in preparing the workforce for the inevitable disruption in a knowledge-driven, globalizing economy.
The trade agreement hasn’t been a big problem. It has been a plus overall, and now its updated version deserves congressional approval.