What if Trump's confrontational trade stance actually works?

The NAFTA 2.0 agreement, or USMCA as Donald Trump wants to call it — and he would appear to have won the r...

Posted: Oct 2, 2018 12:18 PM
Updated: Oct 2, 2018 12:18 PM

The NAFTA 2.0 agreement, or USMCA as Donald Trump wants to call it — and he would appear to have won the right to call it anything he wants — ought to be sending chills up the spines of diplomats and trade negotiators around the world. Trump largely got his way. And now, no one can tell him his bull-in-a China-shop way won't work.

Should Sunday night's sudden 11th-hour approval of the U.S.-Mexico-Canada Agreement give hope or dismay to Europeans hoping to do a trade deal with America, to China fearing a trade war with the United States, or to Iran and Europeans hoping to do any sort of side deal without American participation? In fact, from this perspective across the Atlantic, this NAFTA reboot should only reinforce the newly apparent reality. Trump's unhinged-from-precedence-in-your-face negotiating style actually works.

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Indeed, Sunday evening, a senior American official came right out baldly and boasted to the Wall Street Journal that the new pact was "a template for the new Trump administration playbook for future trade deals." The official might even have left off "trade." This kind of bludgeon-thy-neighbor tactics could work quite well, thank you, in dealing with most of the adversaries Trump has created or confronted in his first two years in office.

All three countries — the US, Mexico and Canada — were characterizing it as a win-win-win. But the leading French daily Le Monde called it like they saw it: "Trump imposes on Canada a new free trade accord."

This is the second trade pact that Trump has managed to strike this year. In March, following months of bluster and threats of torpedoing the 6-year-old KORUS (Korean-US) trade agreement, Korea consented to a new omnibus pact, agreeing at once to slash its average annual steel exports to the US. by 30 percent and have its aluminum exports to the US taxed at a 10 percent level.

At the same time, Korea agreed to double the number of American trucks that could be sold there to 50,000 per manufacturer each year, while scrapping other sales barriers, including emission standards.

Trump bludgeoned the South Koreans into this arrangement -- which he finally signed last month -- at the very moment North and South Korea were seeking a rapprochement that would, within weeks, lead to an invitation culminating in the Singapore summit between Trump and North Korean leader Kim Jong Un. It showed, Trump pointed out, that tough talk on the trade front and use of other forms of diplomatic pressure, not to mention military threats, can produce significant results.

But these two pacts, NAFTA 2.0 and KORUS, are only the tip of a very deep iceberg. Still on the horizon are two sets of omnibus negotiations the US will need to begin with Britain and the Europe that the UK leaves behind in its exit from the European Union, known as Brexit. None of those talks can really begin in earnest until the Brexit process is completed, likely no earlier than next March, an eternity in trade-talk-years.

Finally, of course, there is the mother of all trade disputes, already developing into a trade war, between the world's two leading trading nations, China and the US. Neither side here seems to be anywhere near an early round of productive negotiations, let alone making the kinds of concessions that Trump managed to wring from Korea, Mexico and now Canada. Moreover, with the end of the Obama-negotiated Trans-Pacific Partnership, there are really no other reliable trade pacts involving the US across Asia. Still, as Trump told a news conference the morning after his NAFTA victory, Japan and India have indicated an interest in negotiating tariff agreements. The president called these overtures a tribute to his tough stand on trade, indeed on all sorts of relations between nations — friends or enemies.

For beyond trade, there is a host of other multinational agreements Trump has scuttled with the aim of redrawing them to America's advantage. And that now seems to be a not impossible dream. Europe, as well as Russia and China, is united in the desire to snatch some sort of victory out of Trump's withdrawal from two critical non-trade pacts, the COP-21 Paris climate accord and the Iran nuclear pact. Now, it would seem, with the NAFTA and KORUS victories, there is even less incentive for Trump to budge a jot from his long-held and barely tenable positions.

It is the style and pattern of these NAFTA 2.0 and KORUS negotiations that are most critical to examine closely. First are the threats of withdrawal, followed by bluster, followed by a host of demands bordering on the demented if not outright impossible. Finally come the detailed negotiations, followed by more threats, with each stage punctuated by often off-the-rail tweets, finally leading to an impossible deadline and an 11th-plus hour agreement just as all hope appears lost. Then, of course, there's Trump's chest-pounding I-told-you-so's during an extended series of victory laps. And the rational world throws up its hands in dismay over the style, if not the outcome of these negotiations. Labor likes some of the USMCA pact, but largely as it strengthens labor unions in Mexico. Other interests see this as little more than repurposing of some Trans-Pacific Partnership language. In short, most of American business is simply glad to have a deal it can live with.

Of course, there is one final element that still remains very much an open question. Will a Democratic-controlled House, if such an institution emerges from the midterm elections just six weeks away, approve any trade pact bearing a Trump signature? In fact, the Democrats would do well to consider carefully whether a reflexive veto is actually in their best long-term interests. A deal, after all, is a deal — and this one does protect a host of interests and groups that should be firmly in the Democratic camp. Save your ammunition for the winnable battles.

Already, the world is beginning to examine just how it might adjust to the new realities of a Trump in full roar. It is not a pretty picture now, but deft diplomats and able negotiators must find a way.

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