An end to NAFTA?


By Don McIntosh

President Donald Trump announced Aug. 27 that Mexican and U.S. trade negotiators are in preliminary agreement over what appeared to be a new two-nation trade deal that could take the place of the three-nation agreement known as NAFTA (North American Free Trade Agreement).

“We’re going to call it the United States-Mexico Trade Agreement, and we’ll get rid of the name NAFTA,” Trump said in a celebratory conference call with Mexican president Enrique Nieto. “It has a bad connotation because the United States was hurt very badly by NAFTA for many years. And now it’s a really good deal for both countries.”

Not so fast, said five national labor leaders in a joint statement reacting to the news. “The devil is in the details,” they said. “Working people must be able to review the full and final text and have the confidence not only in the terms of the deal, but its implementation, monitoring and enforcement.” The statement was signed by AFL-CIO President Richard Trumka, United Steelworkers President Leo Gerard, United Auto Workers President Gary Jones, Machinists President Robert Martinez. Jr., and Communications Workers of America President Chris Shelton.

No official text of the new U.S.-Mexico accord has been released, or even officially agreed to by the two sides, but here’s what the Administration has revealed so far about the agreement:

  • To qualify for tariff-free treatment, 75 percent of the value of each car would have to come from the United States or Mexico — up from 62.5 percent under NAFTA. [The content rule is meant to limit the importation of auto parts from China or other non-NAFTA countries.]
  • 40 to 45 percent of auto content would have to be made by workers earning more than $16 per hour. [Because Mexican auto parts workers now average less than $3.50 an hour, while U.S. autoworkers average over $22 an hour, that rule would result in either big raises for Mexican workers, or increased U.S. content in cars assembled in Mexico.]
  • NAFTA’s controversial Chapter 11 Investor-State Dispute Settlement (ISDS) system would be scaled back, and could be used only in cases of expropriation or failure to treat companies equally, or in sectors such as oil, power and infrastructure. [NAFTA critics say corporations have abused NAFTA’s ISDS rules by suing governments over environmental and other regulations that reduce their expected profits, with those cases decided by unaccountable trade tribunals.]
  • Mexico would commit to reform union rights — such that workers would choose their unions and approve union contracts via secret-ballot votes.
  • Unlike NAFTA, which has no sunset clause, the new deal would be revisited every six years, at which point the countries could agree to extend it for 16 years.

“The Trump Administration seems poised to dress up tweaks as a meaningful change to the NAFTA reality,” said Russell Lum, organizer for the union-backed Oregon Fair Trade Coalition in a statement emailed to the Labor Press. “Some of the proposed tweaks we think  would be better, and some of them worse, but to transform NAFTA into something truly beneficial, far more than tweaks are needed.”

The new agreement leaves unresolved the dispute over steel and aluminum tariffs the Trump Administration imposed on Mexico earlier this year.

Even more importantly, it leaves out Canada. Trump demanded that Canada agree to a new deal by the Friday before Labor Day, and when that didn’t happen, he told Congress that he wants to go forward with a U.S.-Mexican trade pact to replace NAFTA even if he can’t reach a separate agreement with Canada. On Sept. 1, he fired off a volley of angry tweets. “There is no political necessity to keep Canada in the new NAFTA deal,” he wrote. “If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out.”

Union leaders and many members of Congress disagreed with that.

“North America’s economies are so integrated that it is hard to see how this new deal could work if our brothers and sisters in Canada are not included,” Trumka and the other union leaders declared Aug. 31. “We think it is a mistake to move ahead on a bilateral basis, and will continue to push to be sure that Canada is included in any final agreement.”

Canada and the United States have had trade disputes over the years, notably over Canadian softwood lumber exports, but there’s little basis to support Trump’s allegation of “abuse” in the relationship. In fact, the United States has had slight trade surpluses with Canada in every year but one since NAFTA took effect in 1994.

Canada’s economy is even more tightly entwined with the U.S. economy than Mexico’s, particularly in sectors like automotive. And the two are close enough legally and politically that many U.S.-headquartered unions have Canadian locals. Canadian locals are what explains the “international” in the name of most American unions, as well as the custom of referring to the top-level union bodies as “internationals.”

Whatever final deal is worked out, Trump will have to formally submit to Congress, which would schedule an up-or-down vote on it 90 days later.


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