America’s Deal With Mexico Will Make NAFTA Worse

Posted August 31, 2018

Under Economic Issues, International Trade Issues

(The Economist)

Trade disputes have scarred the presidency of Donald Trump. So markets rose in relief when America and Mexico announced on August 27th that they had agreed on changes to the North American Free Trade Agreement (NAFTA). Mr Trump had earlier threatened to walk away from the deal, which eliminated most tariffs between its signatories after coming into force in 1994. As The Economist went to press, it was not clear whether Canada, the third party to NAFTA, would join the deal (see article). But across one border, at least, the threat of a trade crisis looks a bit less likely.

The relief may be short-lived. The concessions that Mexico has granted Mr Trump are for the most part economically damaging. The deal looks good for America only through the distorting prism of the president’s mercantilism. And Mr Trump is pursuing his trade agenda with a reckless bellicosity that makes a chaotic outcome more likely. [...]

By elevating arbitrary rules above the free market, these changes make a mockery of the White House’s supposed opposition to intrusive regulation. The result will be lower productivity, higher prices for consumers and a less competitive carmaking industry in North America, which competes as an integrated whole with producers in Europe and Asia. Uncertainty will not disappear. The deal could be rewritten again after six years, thanks to an unspecified review process. Click here to read more.