By Raoul Lowery Contreras
Mexico took President Trump to the cleaners on the newly agreed to “United States Mexico and Canada” trade agreement, or USMCA. That is what the President calls it instead of the NAFTA 2.0 that it is.
Certainly there was some tinkering, but stipulating higher North American content in imported vehicles from Mexico and Canada helps those countries more than it helps the United States. Increasing North American-content from 62.5 percent to 75 percent is not a big deal. Canada, for example, makes far more parts than exportable automobiles.
Providing Trump’s insisted-upon manufacturing caps on parts and autos themselves means little when those caps are far above current or projected sales of those items to U.S. customers. No matter what the caps are, small cars like Nissan’s Versa and Sentra will still be 100 percent manufactured in Mexico because costs are too high in the United States.
We don’t know yet what all the details of the new agreement are, but we do know that the five-year “sunset” provision that Trump originally demanded didn’t survive the negotiations.
No savvy business person or analyst can figure out exactly what Trump had in mind when he demanded a five-year sunset provision because no business executive in his or her right mind would ever consider such an onerous provision. Why? Because it takes more than a year to build a factory, sometimes two or three years. Business planning, therefore has to cover long periods of time. Using a five-year measuring period simply does not work in business, especially in manufacturing.
BMW’s largest factory is not in Germany but in South Carolina. Does President Trump think that the planning, construction and employee training for that factory could have been done in a five year period?
The Trump sunset provision in an agreement with Mexico and Canada never stood a chance of being approved by anyone with a brain. So, gooooooaaaalll! for Mexico and, to a lesser extent, Canada.
Mexico can thank President Trump for more new job creation as companies flood into the country to build new plants to make air bags, alternators, car radios, computer gear, windshields, windshield wipers, bumpers, and so on.
Most of the Mexican-made or assembled goods that are exported go to the United States. So, no matter what claims the President made about NAFTA being the “worst agreement in history,” the three-country trade amounted to over a trillion dollars in 2017.
Moreover, Mexico alone, with 124 million people, buys more from the United States than all of Europe with its 500 million people and all of China with over a billion people.
Any comments made by President Trump about Mexico ripping off the United States were untrue. How, for example, can a country one-third the size of the United States buy as much from us as we do from Mexico? His charges made no sense.
In the final analysis, Mexico wins, Trump and Canada tie. Nobel-Prize winner and New York Times economics commentator Paul Krugman says, “My original prediction on Trump/NAFTA was that we would end up making some minor changes to the agreement, Trump would declare victory, and we’d move on. That’s what seems to have happened.”
That, Dr. Krugman, is being charitable.
Gooooaaaallll! Mexico 1, President Trump 0.
Raoul Lowery Contreras is a political consultant and the author of “The Armenian Lobby & American Foreign Policy” and “The Mexican Border: Immigration, War and a Trillion Dollars in Trade.” His work has appeared in the New American News Service of the New York Times Syndicate.
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