Clinton’s NAFTA or Trump’s USMCA: Which is Better? (EP. 193)

NAFTA

Introduction

Bill Clinton’s North American Free Trade Agreement (NAFTA), while controversial, was widely acclaimed when it was enacted 25 years ago. President Clinton declared. “First of all, NAFTA means jobs. American jobs, and good-paying American jobs. If I didn’t believe that, I wouldn’t support this agreement. In a fundamental sense, this debate about NAFTA is a debate about whether we will embrace these changes and create the jobs of tomorrow, or try to resist these changes, hoping we can preserve the economic structures of yesterday.” Very recently, President Trump declared, “It’s my great honor to announce that we have successfully completed negotiations on a brand new deal to terminate and replace NAFTA (with the US-Mexico-Canada Agreement–USMCA)” Trump continued. “I have long contended that NAFTA was perhaps the worst trade deal ever made.” 

Bill Clinton, globalist. (Kinda)

Barack Obama, global apologist.

Donald Trump, America First. (Pretty much)

That is the subject of today’s 10-minute episode. 

Continuing

President Trump, in his inaugural address, declared, “From this day forward, a new vision will govern our land. From this day forward, it is going to be only America First.” Note from history. “America First” was the name of Charles Lindberg’s organization that bitterly fought America’s entry into WWII, including during the summer of 1940 when Germany was attempting to wrest control of the air over Britain prior to invading, perhaps adding Britain to its conquest of all of consequential Europe. Thereby winning WWII. Lindberg was the first person to fly non-stop across the Atlantic, winning the coveted $25K Orteig prize in 1927. But he got this one wrong. The sneak attack on Pearl Harbor brought America into the war; “America First” dissolved in shame.

Trump’s USMCA is an example of his America First vision. And it is also a great example of the saying, “Politics makes strange bedfellows.” Nancy Pelosi and the AFL-CIO are strong supporters. Yes, the same Nancy Pelosi who is pushing hard to remove Trump from office for “high crimes and misdemeanors.”

Part of the core of what the USMCA does is increase wages and the price of cars. The new agreement gradually raises the bar of North American-made parts in their cars to be imported duty free from 62.5% to 75% by 2023. This will incentivize automakers to increase the amount of North American parts they use in their cars and light trucks. Additionally, to further support North American jobs, the deal contains new trade rules of origin to drive higher wages by requiring that 40-45 percent of auto content be made by workers earning at least $16 per hour. Result: American workers will be paid more; cars will cost more. 

The House of Representatives approved the United States-Mexico-Canada Agreement in an overwhelming 385-41 vote. Thirty-eight Democrats opposed it. The trade pact now heads to the Senate, which is expected to ratify it in 2020.

The new agreement is neither a major advance, nor a huge retreat. It is modestly different. It does reflect Trump’s win/lose, zero sum game view of the world. In other words, Trump believes that for one entity to win, the other must lose. He made that approach work for him in business, and, understandably, he is using that approach as our president when dealing with foreign governments and entities like NATO, the UN, the Paris Climate accords and the TPP (Trans Pacific Partnership). America First.

After WWII, the United States invested staggering sums of money in rebuilding Europe. In what was called the Marshall Plan, named for George Marshall, Army Chief of Staff during the war, and Secretary of State during the implementation of the plan. The Marshall Plan, officially known as the European Recovery Program, rebuilt a devastated Europe. Even the winners were in economic ruins. The win-win was that while we spent boatloads of money, we helped to restore the free world to economic health. These nations became trading partners, and were far less susceptible to the Soviet Union’s siren calls. Yes, the US saw itself as responsible for rescuing Europe. And we did. The US was a–perhaps the–hegemon.

Win-win deals are always better for both parties. Adopting a win-win or no deal strategy for America would benefit us, would provide more advantages to us in deals than the America First approach. Yes, the other party would win as well. But we do not live in a zero sum world. And it is dangerous to act as if we do.

Today’s Key Points: 1. Sports, poker and wars are zero sum games; the rest of the world is not. Win-win or no deal is the order of the day. 2. The US must step up and lead the free world. Nature abhors a vacuum, and if we abdicate that role, someone else will step in. With no one else in the Free World either capable or willing, a country from the non-free world will ooze its smarmy way in. Russia? China? Globalism with a dose of enlightened self-interest is the win-win we must seek. 

Obama backed away from the role of hegemon, the US being a leading, more aptly, the leading world power, because he felt that we were not worthy of the role. His post election tour, often called the Apology Tour, was only one example of that belief. Trump is doing exactly the same thing, retreating from the hegemon role, for an entirely different reason. While Obama felt that we were not worthy of that role, Trump believes that the other countries are the unworthy ones. He believes those countries are not worthy of our support. That they have been cynically allowing us to carry them.

Okay, Will. what’s the answer to the initial question? Clinton’s NAFTA or Trump’s USMCA: Which is Better? Trick question. It really does not matter; there is not much daylight between the two trade agreements. The real question is what is our, America’s, role in the world. Answer. Leader. Active, involved leader. With win-win or no deal as the driving strategy.

Contact 

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Will Luden, coming to you from 7,200’ in Colorado Springs.

Will Luden
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