Congress will likely approve President Trump’s U.S.-Mexico-Canada Agreement, but it won’t get my vote. The USMCA’s many flaws arise from its unprecedented intent. It is the only trade pact ever meant to diminish trade. Since Nafta’s implementation, American exports to Mexico have grown more than fivefold. But imports grew even more, widening the trade deficit. The Trump administration finds this unacceptable, even though the trade deficit is mostly meaningless. Hence USMCA has a myriad of provisions to warm the hearts of protectionists.
For starters, USMCA terminates free trade in cars and auto parts. To avoid new tariffs, the Mexican auto sector would have to comply with onerous new content requirements (country rules of origin) and pay wages far above prevailing Mexican rates. These provisions, by design, would make Mexican factories uncompetitive. They would also raise car prices, shrink North American auto exports and eventually reduce U.S. auto employment.
Another first is USMCA’s 16-year expiration date. That will chill trade and investment by introducing considerable uncertainty about the future terms of trade. Evidently, that’s the idea in USMCA.
My intrepid Mercatus Center colleague Veronique de Rugy warns of the dangers of price controls.
Looking back at the 20-teens, Matt Ridley celebrates that decade as the best in human history. A slice:
Perhaps one of the least fashionable predictions I made nine years ago was that ‘the ecological footprint of human activity is probably shrinking’ and ‘we are getting more sustainable, not less, in the way we use the planet’. That is to say: our population and economy would grow, but we’d learn how to reduce what we take from the planet. And so it has proved. An MIT scientist, Andrew McAfee, recently documented this in a book called More from Less, showing how some nations are beginning to use less stuff: less metal, less water, less land. Not just in proportion to productivity: less stuff overall.
Also justifiably celebrating the 20-teens is Johan Norberg. A slice:
Progress isn’t guaranteed. Look how wealthy Venezuela collapsed under the burden of crazy policies. A war between major powers, or a financial crash after a decade of easy money, could throw the world off course. So could never-ending trade wars and an unraveling of globalization.
Yet we’ve lived through a period of populist revolts and geopolitical tensions, and wherever societies have been open and markets free, scientists, innovators and businesses persisted and made greater progress than ever.
Jeffrey Tucker makes the case that big-government leftism is dying. I hope that he’s correct. I hope also that in its place will rise a politics genuinely inspired by classical liberalism, but I’m less optimistic about this latter possibility than Jeff seems to be.
