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Leaders send 'NAFTA 2.0' to lawmakers

North American leaders signed a new trade pact that the Trump administration claimed was a major accomplishment but analysts said was more of the same.

North American leaders signed a new trade pact that the Trump administration claimed was a major accomplishment but analysts said was more of the same.

The new United States-Mexico-Canada Agreement resulted from U.S. President Donald Trump's pledge to replace the 1994 North American Free Trade Agreement. Trump had described the NAFTA free-trade zone as “perhaps the worst trade deal ever made.”

The White House said the new agreement, dubbed USMCA, is "a modern and rebalanced trade deal" that helps American farmers, ranchers, businesses and workers. In Canada, it's called CUSMA, with Canada first. In Mexico, it's T-MEC, with Mexico first.

Regardless of name, lawmakers' approval in all three countries is needed before it can go into effect.

Trump's political win was overshadowed by the U.S.-China trade war, his contentious steel and aluminum tariffs and General Motors' announcement it will close up to five U.S. and Canadian factories and cut more than 14,000 jobs in the next two years to save US$6 billion.

GM has put the blame squarely on Trump, saying his tariffs on imported steel cost the company US$1 billion. Trump's new trade deal would drive up costs for companies like GM even higher, because it calls for 30-40% of auto components to be made by workers that earn at least US$16 an hour, about triple the average wage in Mexico.

Labor unions hope the measure will keep U.S. and Canadian jobs from going to lower-paying Mexico, or to Asia. The agreement also gives U.S. dairy farmers more access to the protected Canadian market, particularly with so-called Class 7 milk products such as milk powder and milk proteins, which are called the skim that is used in cheese and yogurt.

"This new deal will be the most modern, up-to-date and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed," Trump predicted.

'The new NAFTA'

The signing ceremony for Trump, Canadian Prime Minister Justin Trudeau and outgoing Mexican President Enrique Peña Nieto was coordinated on the sidelines of a Group of 20 major economies' summit in Buenos Aires, Argentina.

Trudeau called the new deal "a major step for our economy," and said the tariff-free access NAFTA guaranteed for 70% of Canada's exports remains "secure" under the deal, which he called "the new NAFTA" rather than Trump's chosen acronym, USMCA.

Peña Nieto said he was honored to be at the signing on the final day of his administration. He said the pact was "the culmination of a long process of dialogue and negotiation, which allowed us to overcome differences and reconcile visions."

The deal now goes for approval to the U.S. Congress, Canada's Parliament and Mexico's Congress of the Union. Getting approval from lawmakers could be a tall order in the United States, where Democrats lifted by midterm elections are challenging Trump's agenda as they prepare to take control of the House of Representatives in January.

Trump's Republican allies, such as U.S. Senator Deb Fischer of Nebraska, praised USMCA. Fischer said agricultural producers and their families "depend on access to international markets, especially during these difficult times for the farm economy."

Trump's political opponents and many trade analysts, however, said the new deal isn't much different than the old one.

"There’s no question we need to renegotiate NAFTA. But as it’s currently written, Trump’s deal won’t stop the serious and ongoing harm NAFTA causes for American workers. It won’t stop outsourcing, it won’t raise wages, and it won’t create jobs. It’s NAFTA 2.0," said U.S. Senator Elizabeth Warren, Democrat of Massachusetts.

Democrats and U.S. labor unions said USMCA needs stronger work and environmental protections, better enforcement, higher wages and recognition of climate change as a dire problem.

NAFTA made strong linkages between trade and environment, but given Trump's dismissal of the science behind climate change, there was little to no chance that USMCA would include a reference to the 2015 Paris Agreement, which Trump announced the U.S. would abandon, or to the United Nations' Framework Convention on Climate Change.

The new trade deal mentions “clean technology” and "carbon storage,” and it "mirrors the list approved by the U.S. Congress of multilateral environmental agreements," according to the Canada-based International Institute for Sustainable Development.

That list notably includes the 1989 Montreal Protocol on ozone protection; 1975 Convention on International Trade in Endangered Species of Wild Fauna and Flora, known as CITES; and 1982 U.N. Convention on the Law of the Sea.