Three lessons from the U.S.-Mexico-Canada agreement that has been delayed for more than a year

If nothing else, this new agreement to replace the existing North American Free Trade Agreement (NAFTA) will pass the U.S. House of Representatives on Thursday (19) and return to the Senate for approval early next year.

Although the North American Free Trade Agreement has been criticized by Trump as unfair to the United States, in addition to its US-Mexico-Canada Agreement, in addition to adapting to the new electronic trade-related provisions of the era, it has not changed much. The production ratio of auto parts in the original region, as well as the minimum wage guarantee for auto workers, have weakened Mexico’s competitive advantage.

Lesson 1: U.S. internal affairs block trade agreements

Although the Republican Party controlled both houses of the United States Congress in 2018, it was too late to pass the domestic bill required by the US-Mexico-Canada Agreement before Democrats regained the majority in the House of Representatives in January 2019. So the nightmare started.

The Democratic Party insists that the labor protection clauses of the agreement are not enough to protect American workers. It has been delaying the agreement. The domestic and US trade representative Robert Lighthizer opened fire behind closed doors. Eventually, the latter had to accept that the Democratic Party held the agreement to kill or kill power. In fact, both Canada and Mexico were persuaded to accept the new conditions demanded by the Democratic Party.

In addition to increasing the requirements for the use of steel in the region for the production of automobiles in the region, the new version of the agreement adds labor protection such as “organization of trade unions” and “collective bargaining rights”, and establishes a group of independent international labor experts as relevant labor security. Implementation mechanism.

At the same time, due to the high medical costs in the United States, the people of both parties have become increasingly dissatisfied with pharmaceutical companies in recent years. The old version of the US-Mexico-Canada Agreement to protect the term of biomedical patents was eventually deleted, so as not to cause US political circles to borrow international trade agreements The impression of Lee Pharmaceutical Factory.

It can be seen that no matter what the agreement with other countries has achieved, the change in the domestic political situation in the United States in this era of pan-politicization is likely to change the “finished” agreement back to the protracted “unfinished” negotiation. The chairman of the House Ways and Means Committee, Richard Neal, said that he and Lighthizer “set a world record for the number of calls to each other.”

Lesson 2: There is always a distance between agreement packaging and reality

Secondly, judging from Trump’s deliberate use of the North American Free Trade Agreement and renaming the agreement to the US-Mexico-Canada Agreement, it can be seen that the packaging of a trade agreement is sometimes as important (or even more important) than its actual content. ).

The importance of the agreement package can also be seen in the sudden trouble in Mexico last Saturday, and in the process of returning to the United States and Mexico on Monday.

In order to ensure that the factories in Mexico comply with the labor protection clauses in the agreement, the Democratic Party proposes that the United States can send a “labor inspector” directly to Mexico to inspect the implementation of the provisions as part of the implementation mechanism of the agreement. However, this kind of arrangement that looks like “bereavement and disgrace” is certainly not acceptable to Mexico, so in the version of the agreement signed by the representatives of the United States, Mexico and Canada last week, there was only an arrangement of an independent international labor expert group.

However, the devil is in the details. According to the interpretation of former Mexican negotiator Kenneth Smith Ramos, the new agreement allows the United States to implement retaliatory penalties before the panel of experts makes a decision. This undoubtedly turned the group of experts into a symbolic presence in Mexico, serving as the “equivalence” of the packaging agreement.

What’s more, the relevant bill in the House of Representatives added that the United States sent a “commissioner” to inspect Mexican factories. The text of the bill was only delivered to the House of Representatives on Friday (13th), which surprised Mexico Seade, Mexico ’s deputy foreign minister responsible for negotiations, and accused the United States of attempting to “undercover Chen Cang” before consulting the Mexican side to allow “labour The “Ombudsman” revived.

Sid’s protest was actually just a political play that “Mexico is not inferior to the United States and strives for reason.” He met with Lighthizer on Monday and received a letter from the latter stating that the “Commissioner” is not a “labor inspector” and must comply with all relevant Mexican laws. He immediately stated that he was “absolutely satisfied” with the US interpretation, and stated Lighthizer has apologized to him for the misunderstanding; the Ministry of Foreign Affairs of Mexico also immediately agreed, saying that “no country can send commissioners to Mexico except Mexico itself.”

However, 80% of Mexico ’s exports depend on the US market. If the United States sends commissioners in accordance with its laws and cooperates with the agreement to allow the United States to retaliate first, Mexico will have to follow suit.

This shows that the packaging of a trade agreement is likely to differ significantly from the content or actual effect of the agreement. To understand the facts, we must not just look at the public statements of the representatives of the parties on the table.

Lesson three: enforcement mechanisms may add weapons to U.S. trade sanctions

Finally, in the current situation where politicians from the two parties in the United States are also inclined to accept tariffs or other trade means as diplomatic weapons, adding stricter enforcement mechanisms for labor protection will definitely add reasons for the United States to sanction other countries.

Under Trump, the United States’ basis for dealing with other countries through trade means mainly came from section 301 of the Trade Act of 1974 and section 232 of the Trade Expansion Act of 1962. The former was based on the consideration of “unfair trade”. The latter is for “national security.”

Because many bilateral trades are difficult to find justification for “trade unfairness”, and it is too ugly to often resort to “national security” considerations. Starting with labor protection, it may well become the United States’ non-trade through Mexico or Canada through trade The path of diplomatic goals, in disguise, adds gunpowder to the US diplomatic arsenal.

Therefore, in the formulation of the enforcement mechanism, the countries negotiating with the United States must be more careful not to allow the United States to retaliate on trade with conditions that are extremely broad and difficult to measure, such as labor protection.

As the “Mexico-Canada Agreement” has always been regarded as the blueprint for the United States to sign trade agreements with other countries in the future, other countries that are or will enter into bilateral trade relations with the United States should really learn from this experience to prevent problems before they occur.