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Trump’s North American Trade Charade

US President Donald Trump's goals in renegotiating the North American Free Trade Agreement were to reduce the current-account deficit and restore US manufacturing jobs. But the new United States-Mexico-Canada Agreement fails on both counts and will reduce US employment and weaken American producers' position in international markets.

WASHINGTON, DC – When the United States-Mexico-Canada Agreement (USMCA) was announced, it was met by a sigh of relief around the world. A deal to replace the North American Free Trade Agreement meant that a complete disaster had been averted. Repudiation of NAFTA with no replacement would have been so costly that it was always a distant possibility, but it was a possibility all the same.

Still, the best that can be said is that the worst will not happen. Two of most damaging US proposals were rejected or weakened significantly. First, instead of a sunset clause that would have forced a renegotiation every five years, the parties agreed to a 16-year sunset, with a review of the arrangement every six years. Given that a five-year renewal schedule would have created massive uncertainty for businesses and governments alike, the 16-year proviso is to be welcomed. That said, it remains to be seen what the six-year review will entail.

Second, the “Chapter 19” dispute-settlement mechanism that the Trump administration wanted to kill has been retained, albeit in a watered-down form. This provision will offer some buffer –specifically, for Canada – against anti-dumping duties and other protectionist measures. Among the other minor changes to NAFTA under the USMCA, most had already been agreed to during negotiations for the Trans-Pacific Partnership, which US President Donald Trump abandoned upon taking office.

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