Thursday, October 4, 2018

The Trump Trade Deal: The Bad and the Ugly

While some provisions of TRUMPSTA move in the direction of free trade other provisions do not.

Here are Simon Lester and Inu Manak on the Bad and the Ugly:

The Bad:

– FTAs with China: The agreement discourages the NAFTA parties from negotiating trade deals with non-market economies, which means China and a few others. Limitations on negotiating other FTAs are a bad idea generally; it remains to be seen what actual impact it will have here (Canada and China have been talking about negotiating an FTA).

The Ugly:

– North American auto trade: The new rules of origin are extremely restrictive, raising costs for auto production in North America. This could lead to more production being done outside of North America, or higher costs for consumers. This is the most negative part of the new agreement.

– Sunset clause: The sunset clause is weakened from the original U.S. proposal – under which the agreement would expire automatically after five years unless all three countries agree to extend it – but it is still problematic. The revised provision may end up being harmless, but there are risks, and it would be better to take it out. (via Cato)

That TRUMPSTA discourages parties to the agreement from negotiating separate trade deals with China is particularly horrific. It is the Empire flexing its anti-trade muscles. And, of course, there are the aggressive regulations on auto manufacturing, which are hidden tariffs that will make autos much more expensive for US consumers.

Robert Wenzel is Editor & Publisher of

1 comment:

  1. So, obviously as RW mentioned in another post, the devil is in the details with these things, but my initial reaction is one of mild relief that we are getting off relatively light on this one. It initially seems that this is no more than marginally worse than NAFTA.

    I'm kind of reminded of how I felt about the Obama stimulus and Obamacare. They were bad to be sure, but in light of the economic crisis at the time, it felt like the appetite was there for a more heavy-handed nationalization and the imposition of socialized medicine, and I felt some measure of relief that we were just getting more cronyism and intervention rather than full-on socialism.

    Likewise, Trump and his supporters have been constantly banging the drum for trade wars and barriers over the past couple of years (with really no one besides libertarians making the case for free trade) so I had been expecting worse.

    This is more the kind of policy that I initially expected during Trump's campaign: a lot of fire and brimstone to appease the anti-trade populists, but much less in the way of the actual disruption of international trade, other than some superficial re-working so that he could claim that his fingerprints were on the policy. I'd since become convinced that I'd been too optimistic, and that Trump was more earnest in his anti-trade rhetoric than I'd suspected, but maybe this is a indication that there's some hope after all.