Trump's New NAFTA Plan Might But Probably Won't Work

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For months, trade negotiators from Canada and Mexico have been chastising U.S. President Donald Trump’s team for demanding the North American Free Trade Agreement to be amended so vehicles are required to contain a large percentage of U.S.-produced parts. But now, reports the New York Times, the U.S. is pitching an idea that would require vehicles to contain certain components made by workers earning a specific wage.

And while we’re not going to get into a dumb argument about American workers versus Mexican workers versus Canadian workers, we’re all for all workers of the world getting paid a living wage, in this case, at least $15 an hour. If automakers are greedy and don’t want to raise the earnings of its workers in Mexico, for instance, then it could move those jobs to the U.S. or Canada. At least some workers would win in either scenario.

(Trump’s Chinese tariff plan, however, is still extremely bad.)


Here’s how the Times described it:

The United States has now backed away from a proposal that would require half of the value of an automobile to be manufactured in the United States to qualify for Nafta’s preferential tariffs. Instead, it is proposing a system that would require a certain proportion of auto parts to be made by workers earning certain wages.

That proposal is likely to be more palatable to Canada and could also encourage Mexico to ultimately pay higher wages. And it could help Mr. Trump court the votes of congressional Democrats, who complain that Mexico’s low wages are the reason companies have relocated auto production from the United States.

If it sounds like an aggressively complicated proposal to you, our neighbor to the south and some unnamed auto executives agree.

Still, the proposal is likely to face opposition from Mexican negotiators, given that their current wage scales are too low to qualify. And some auto executives also criticized the new proposal, saying it would be nearly as difficult for companies to comply with as earlier ideas, and could ultimately push manufacturing out of North America to cheaper areas.


You might recall, the NAFTA renegotiations have been fraught with tension, thanks to Trump issuing blathering threats on a regular basis that he’ll just scrap the whole deal if he doesn’t get his way. At this point, who knows how things will end up, but the Times portrayed the recent proposal as a sign that NAFTA could be revived and saved.

There’s one key issue, though. Negotiators have only concluded discussions on six of NAFTA’s roughly 30 chapters, reports the Times, which added “little progress has been made on contentious issues like mechanisms for settling trade disputes or rules for government purchases.” We’ll see what happens, I guess.