The U.S. Has No Vision for North American Competitiveness & Economic Cooperation

The three trade ministers of the United States-Mexico-Canada Agreement (USMCA) held their first meeting of the Free Trade Commission this week. The Commission carries over from the North American Free Trade Agreement (NAFTA), whose job is to oversee implementation of the agreement, supervise the work of the various committees the agreement created, and to consider potential changes to the trade deal, among other things. An underlying motivation for past meetings, and enshrined in the USMCA, is for the ministers to “consider ways to further enhance trade and investment between the Parties.” However, the creative collaboration and forward thinking that tends to guide these meetings was virtually absent. Instead, what the Commission meeting best reflected was a United States unsure of how to engage with two of its closest trading partners, and no vision for how to move beyond the USMCA. This ambivalence was on full display in the opening remarks by U.S. Trade Representative Katherine Tai, where the benefits of trade with our neighbors to the north and south went unmentioned. Instead, she praised her predecessor for “updating and remediating a 25-year-old agreement that faced significant criticism at its start” and stated that “We have gone from viewing trade agreements exclusively as a path to liberalization, to restructuring the rules in an effort to rebalance the impacts of the agreement.” She’s not wrong that the USMCA is not really about liberalization. As I’ve noted elsewhere, the economic impact assessments of the deal raise some serious concerns about its economic benefits. But she is wrong to conflate criticism of NAFTA with an objective evaluation of its performance. But Tai appears less concerned by that, at one point criticizing the “fragility” of global value chains, and arguing that “efficiency has proven to be detrimentally expensive.” Research does not support these claims. As political scientist Dan Drezner recently noted, “global supply chains are not fragile and the geopolitical risks to them have been exaggerated.” My colleague Scott Lincicome has also pointed out that open markets actually enhance supply chain resilience. Turning specifically to North America, it’s worth remembering that integrating the auto supply chain across our three economies helped the U.S. auto industry stay competitive. Amb. Tai’s comments were also in contrast with remarks from Canada and Mexico, which focused on the strength of our economic ties. Mary Ng, Canadian Minister of Small Business, Export Promotion and International Trade, expressed how the COVID-19 pandemic revealed not, as Tai suggested, fragility, but rather “the resilience of our industries, the importance of our trade relationships, and how critical it is to maintain open global supply chains.” Furthermore, Minister Ng acknowledged just how much liberalizing trade has been a boon for North America, stating: Remarks by Mexico’s Secretary of Economy Tatiana Clouthier were a little more tailored to fit with the U.S. message, but were also forward thinking in what comes next, calling on her two partners to: The trilateral statement released at the end of the meetings mainly reflected the U.S. position, softened at the edges by Canada and Mexico, no doubt. There was no mention of the benefits of trade and investment generated by NAFTA specifically, nor any general mention of how trade has improved regional competitiveness and linked the three countries through important people-to-people bonds. Instead, it was framed as a one year celebration of the USMCA (which I should point out is mostly NAFTA with some key changes), and the three countries recommitted themselves to “fully implementing, enforcing, and fulfilling the Agreement’s terms.” The theme echoes Tai’s remarks of doubling down on enforcement, something that she has emphasized in congressional testimony as well. Why should we care about these subtle framing choices? For long time NAFTA watchers, the asymmetry and ambivalence that characterizes the relationship between Canada, Mexico, and the United States is not new. And while NAFTA has also been the punching bag of choice by U.S. politicians (particularly on the campaign trail), only under President Trump did we see the campaign rhetoric carry over into policymaking. In the history of meetings of the NAFTA Free Trade Commission and its higher-level counterpart, the North American Leaders Summit, the tone has been positive, with all three parties in agreement on the benefits of their relationship. These meetings were seen as opportunities to build on our economic ties. In the last meeting of the Free Trade Commission in 2012, United States Trade Representative Ron Kirk, Canada’s Minister of International Trade Edward Fast, and Mexico’s Secretary of the Economy Bruno Ferrari, stated, “As we share in the NAFTA’s ongoing benefits, today, we agree on actions to expand trade and investment, reduce administrative costs, and thereby further strengthen North American competitiveness.” And, in a 2016 North American Leaders Summit meeting between President Obama, Prime Minister Justin Trudeau, and President Enrique Peña Nieto, they set out an agenda for regional and global cooperation to tackle shared challenges, including a top issue on the Biden agenda today, climate change. This spirit of trilateral collaboration is absent today. And while the current trade ministers were particularly careful to emphasize the “cordial” nature of their meeting, it is not clear that the entire exchange was, in fact, cordial. The press conference that was to be held after the meetings on Tuesday was pushed back two hours from its 6:00 pm ET start, apparently due to last minute changes to the trilateral statement. Whether the disagreement on what would go in the release was a serious difference of opinion or just sparring over word choice is unknown. But beyond the optics of the press release, there also seem to be growing tensions on a number of different issues: from U.S. concerns over investments in Mexico’s energy sector and recent labor disputes to disagreement on how to implement auto rules of origin—Canada and Mexico are arguing that the U.S. does not share the same interpretation of the flexibilities granted in the USMCA. Putting aside the diplomatic niceties, what the first meeting of the USMCA Free Trade Commission revealed is that liberalizing trade is not high on the agenda for the United States (I am still surprised that the FTC was not renamed like NAFTA to account for this shift). Instead, the U.S. is continuing a zero-sum approach to trade, dressed in feel good rhetoric to make trade more “inclusive” and “worker-centric” without going into any specifics about what any of that means or how that will be achieved. Now, it is true that the Commission meetings tend to be less important for moving our shared economic interests along than the North American Leaders Summit. But there is no indication that such a meeting is on the Biden administration’s agenda.