The U.S.-Mexico-Canada (USMCA) trade agreement passed the Senate today, 89-10. As with the Phase One agreement with China that was also signed this week, USMCA is valuable damage control. Three years of unpredictable tariff increases, threats of increases, and diplomatic tensions will hopefully have more stability going forward. Unfortunately, while NAFTA needs some updates, few of them are contained in USMCA’s more than 2,000 pages.
As far as short-term policies, USMCA is not very different from NAFTA. USMCA’s real cost is long-term, which is why Iain Murray and I came out against USMCA last month. Its bad precedents will likely inform upcoming agreements with China, the United Kingdom, and the European Union. Unlike USMCA, these upcoming agreements are potentially transformative. It is important to get them right.
Trade agreements should stick to trade issues. That is the real lesson of the USMCA battle. USMCA is filled with trade-unrelated provisions covering labor, regulatory, environmental, and other policies. It contains naked giveaways to business, labor, and environmental interests. To the extent these provisions touch trade at all, they make it more cumbersome—opposite USMCA’s purpose. These same special interests will almost certainly ask for more, and receive, larger handouts in future agreements.
China is struggling to choose between freedom and continued despotism. The United Kingdom is leaving the European Union. And the EU itself is undergoing changes both internally and on its place on the world stage. The U.S. must engage each of them in ways that ensure mutual peace and prosperity. Part of that larger agenda is free trade. Our upcoming trade agreements with them must be open, transparent, and contain as few trade-unrelated complications and special interest giveaways as possible. These side agreements risk scuttling needed reforms and inflaming diplomatic tensions, while increasing corruption.
USMCA sets a bad precedent for these more important upcoming agreements. Its ratification makes it much harder to overcome political inertia and move global trade policy in a simpler, more open direction. USMCA may be a fait accompli, but it is not too late to learn from it and do future agreements the right way. This means sticking to trade and, to the extent possible, leaving politics out.