No Big Deal

Trump brags about being the author of The Art of the Deal. In reality he told a lot of stories to Tony Schwartz who actually wrote the 1987 book. During that time period I was not as far removed from my college days as a management major and I read a lot of business books. Reading The Art of the Deal was a waste of my money and time. It was basically Trump bragging about his malarkey deals that largely the average American paid for. History repeated itself on Monday afternoon except Schwartz didn’t have to do any writing. Let’s explore.  

Desperate to distract from the Kavanaugh debacle Trump held a press event on the White House grounds bragging about his newest international deal which he is calling USMCA. That stands for United States-Mexico-Canada Agreement and is his replacement of NAFTA. Trump claimed, “It’s not NAFTA redone, it’s a brand-new deal.” If you believe that you are probably lined up at a mothballed steel plant or coal mine so that you can be the first in line to apply for a job that is never materializing. NAFTA is (and it still applies today) a 1994 trade deal hammered out during the Clinton administration. Trump had to rename if because he can’t stand anything any of his predecessors did. In reality USMCA is NAFTA 2.0.

The deal has to be approved by the legislatures of all three countries and assuming that happens still won’t take effect until 2020. It is basically NAFTA slightly updated with a few wrinkles. In all honesty some may well prove to be good; some certainly will not.

One of the big selling points is that starting in 2020 75% of the content of North American nameplate cars must be made in one of the three countries. That does not mean in the United States. That is an improvement for the region if not necessarily America but it is only a small bump up from the current 62.5% requirement.

Another provision that has Bubba all excited is that in 2020 30% of auto workers in the three countries must earn $16 an hour. In 2023 that percentage goes up to 40% where it stays. Let’s examine that. $16 per hour is $33,280 per year. That is a great salary in Mexico but nothing spectacular in the US or Canada. I think this will bring more good paying jobs to Mexico but what does it do for Canada or the United States? Fast food and other service workers are asking for $15 per hour which comes to $31,200 annually. Remember that even after full implementation in 2023 the majority of North American auto workers can still be paid less than $16 per hour. The way liars figure (and Team Trump knows a lot about that) I see Mexican auto plants paying supervisors and above the $16 per hour and keeping line workers pay below that level despite increased business. The bottom lines are that American auto manufacturing jobs may well be lost and the price of automobiles sold in America will most likely increase. How do working class Americans win in that scenario?

Then there are the matters of the renewal and sunset provisions. Assuming the legislatures approve the deal in the first place, it must be renewed after six years. Am I the only one who sees a battle there? On the assumption it gets renewed (most likely with some needed tweaks) it completely sunsets after 16 years.

I come from the Rust Belt and a union community so I’m sure it will come as no big surprise when I tell you that I was never a NAFTA fan. More recently I was among the many Democrats who were opposed to TPP. With the benefit of a bit of hindsight TPP wasn’t all that bad. I think the biggest problem with it is that Obama did a lousy job of selling it. USMCA is basically NAFTA 2.0 with some principles of the TPP deal that Trump immediately threw in the trash heap much to the delight of China.

I’m sure Trump will be touting USMCA on the campaign trail but in reality it is probably no big deal and certainly not a great positive one. In fact it may hurt more Americans than it helps.

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