Lessons for the Left from NAFTA Mark-II

By   /   October 9, 2018  /   16 Comments

TDB recommends Voyager - Unlimited internet @home as fast as you can get

We underestimate Trump’s people. We don’t have to support their visceral racism and sexism and cynical manipulation of populist sentiment to recognise that something significant is happening. The rewrite of the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico released last week poses crucial challenges for the left that we need to understand if we are to shape a genuinely alternative, progressive new strategy for the future – the goal of our hui in Auckland on 19-20 October.

We underestimate Trump’s people. We don’t have to support their visceral racism and sexism and cynical manipulation of populist sentiment to recognise that something significant is happening. The rewrite of the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico released last week poses crucial challenges for the left that we need to understand if we are to shape a genuinely alternative, progressive new strategy for the future – the goal of our hui in Auckland on 19-20 October.

A key platform of Trump’s Make American Great Again MAGA is to reverse the offshoring of jobs and capital by removing incentives for US firms to shift to cheap labour countries, meaning Mexico in the case of NAFTA. This has been a core demand of US unions and many Democrats. The revised NAFTA – unimaginatively called the US Mexico Canada Agreement  – ups the amount of content of automobiles that must be produced in the three countries to get the benefits of lower tariffs and requires initially 30%, then 40% of that content to be produced by workers earning USD16 an hour. The labour chapter in theory imposes some enforceable labour standards.

A second festering sore in NAFTA was the right of foreign corporations to sue host governments known as investor-state dispute settlement or ISDS. That is gone between Canada and the US, with a 3-year transition. It is significantly wound back between the US and Mexico, except for oil and gas companies like ExxonMobil who secured special treatment for their contracts with Mexico.

The US agreed to an exception on indigenous rights that allows a government to adopt or keep a measure it deems necessary to fulfill its legal obligations to indigenous peoples. That is a more extensive version of the Treaty of Waitangi Exception and leaves out some (not all) of its problematic limitations, posing an interesting dilemma for a Labour government that claims the existing Treaty exception is as good as it can get.

At the same time, NAFTA-II imports some of the worst parts of the TPPA, strengthened to reflect the US’s initial demands.  Monopoly protections for new generation biologics medicines go beyond what Mexico and Canada agreed to in the original TPPA, in provisions that are now suspended. The rights of foreign firms to lobby and interfere in domestic policy making becomes enforceable. The electronic commerce chapter, designed by and for the Big Tech lobby of Google, Facebook, Amazon and others, is largely unchanged. The financial services chapter leaves Wall Street untamed. The environment chapter is even weaker than TPPA, and of course no reference to climate change.

Other novel provisions reflect the obsession across the political spectrum in the US with China. If Mexico or Canada begin negotiations with a ‘non-market’ country they have to tell the other two and show them draft texts during the negotiations, so they (the US) can decide whether to terminate the NAFTA-II arrangement altogether. In other words, Mexico or Canada can have a deal with China or the US, but not both. NAFTA-II also carries over the TPPA’s State-owned Enterprise chapter that was designed to target China’s SOEs at home, in the US and as competitors in third countries.

This is just a sample of what’s there. No-one knows if this is a one-off to deliver on Trump’s election promise or a new template for the US. The revised agreement with South Korea is more traditional, but it pre-dates NAFTA-II. Whichever, it poses a serious quandary for the left that extends far beyond the US and this agreement.

Whether this deal will really strengthen unionisation in Mexico or restore quality well-paying manufacturing jobs in the US is uncertain, and misses the point. NAFTA-II will play well in the states that Trump captured in 2016 and is much more important electorally than me-too and Kavanagh.  Of course, other factors will affect the pending mid-term election and the 2020 presidential race. But Trump’s new trade strategy will work for him.

There is enough in NAFTA-II for the unions, social movements and Democrats in Congress to reject it. But being anti-Trump is not enough. When I was in Washington several months ago talking to Democrats it was clear they have no alternative agenda. Obama’s pro-TPPA stance divided them. Now Trump has stolen some of their platforms and many of their constituents. They desperately need to develop a new progressive alternative agenda and strategy, but seemed paralysed.

There are crucial lessons here for us. The official response, most recently from Jacinda Ardern in New York, is to defend the ‘rules-based multilateral trading system’ in the face of Trump’s ‘protectionism’. That is a false dichotomy and misrepresents the challenge Trump poses.

The choice is not between the unilateralism of a populist autocrat who is supported by a supine Congress, which is in turn captive of the world’s most powerful corporations, on one hand, and the failed neoliberal model, brewed in the WTO and polished in the TPPA on the other. A few clip-on statements on gender and small and medium enterprises is not a progressive alternative.

We need to grasp the nettle and build momentum for something that is genuinely new and works for us all. Join us at the hui on What an Alternative and Progressive Trade Strategy Should Look Like online at itsourfuture.org.nz/hui-2018/ or Daily Blog, or at the Fale Pasifika on 19-20 October.

 

 

***
Want to support this work? Donate today
***
Follow us on Twitter & Facebook
***

16 Comments

  1. Sam Sam says:

    Seems like a textbook pain trade. Just whack every one and say sign or the U.S. walks. Canada and Mexico will be happy to agree while Trump focuses 100% on domestic policy. To be honest I don’t think The Mexican President Nieto, Trump or Trudau actually care about geopolitics or treaties or the economic reality either exist in and can be useful to each other and abroad.

  2. Keepcalmcarryon says:

    Thank you Prof Kelsey, very informative.

  3. David Stone says:

    Trump’s Republicans might be a right hand reciprocal of Roger Douglas’ Labour. Taking the traditional right wing party way left of where the left wing Democrats would dare to tread, least their corporate sponsors desert them.
    Interesting though that in order to recover the livelihood of the deplorable workers of America on the domestic front he has to invoke nationalist policies on the international front. So to look after America’s own working class the rest of the world’s workers have to be disadvantaged.
    Might be a significant truth in there somewhere . The left tends to look on Nationalist policies and political parties as extreme right wing and maybe neo-nazi . There might be a terrible (deplorable) contradiction in this outlook.
    D J S

    • Jays says:

      Or you can look at it from those workers point of view that they have suffered for the last 30 years in order for foreign workers to benefit.
      The question is why should the USA screw it’s own workers for others benefit?
      If a NZ company offshores it’s operations to China, do you support that?

  4. CLEANGREEN says:

    Yes jane thank you for keeping us in the picture as I now am very uncomfortable about the TPP or what it is called now because the other countries are shaky with unstable governments largely and we really don’t know what they will try on when they come here.

    Secondly as our minister of finance is so tight now at spending he may just fold when the first dispute comes our way and you have taught us that we will face disputes sooner than later.

    • CLEANGREEN says:

      Jane; Our family is sorry to be not at this Hui, because I as the senior of our family are required to babysit my grandson 7yr old between 18th and 25th october.

      Our family wish you well, with the hui.

      Statement for the hui;

      Count our family in for what the hui proposes, as we will strongly support revisiting the current (CPTPP) that replaced the TPPA agreement that NZ Labour made a botch of by fast tracking the changes.

      On 23 January 2018, negotiations were concluded on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

      The new revisions in the (CPTPP) that David Parker proposed still leave the new (CPTPP) agreement still as a very shaky deal.

      The new replacement for TPPA (CPTPP) still does not protect our country from any costly disputes that powerful corporations will ultimately throw at us;

      NZ taxpayers cannot afford the legal costs.

      Nor can we suffer further erosion and damage to our own sovereign right to govern in the best interests of our citizens.

      Under (CPTPP) we can no longer ensure that our right to health. wealth and wellbeing are fully protected in the future

      Please read our statement out in our absence, at the hui for our family please.

  5. Marc says:

    Yes, that is how Trump wants it on the global trade stage. America FIRST, screw the rest, they have to come begging to us for any concession.

    Ever more division and it will hurt many countries that are small, also New Zealand Inc..

    Our dependence on China for exports we send there will be something Trump does not like to see.

    • Sam Sam says:

      The economics theory behind free trade doesn’t factor in geopolitics. In reality America isn’t going to buy all its tanks from China even though it would be cheaper and more efficient. Politics really doesn’t come into it, it’s much more important deals between to parties are mutually beneficial and competition is good. American and Australian interests are currently trying to block a proposal for China to build Papua New Guinea internet network with a better proposal of there own. The difference being that locals get to choose somewhat. Before free trade colonisers use to come in, shake every one down, take all the resources and say suck it. Even now our own government struggles to let go of there grip on Māori resources. There’s allways a native school argument, oh your not ready to manage resources yet, you need to prove that you’re civilised and bullshit.

  6. Jays says:

    The Democrats are screwed because their answer for the working class was “let them eat cake”.
    Trump promised to do something and so the rust belt voted for him, even if they didn’t believe him.
    Doing so was completely rational when you consider the choice was between someone who might possibly do something different and someone who promised more of the same.
    To call all of these trump voters racist is dishonest. Most are just desperate.

  7. David Stone says:

    https://edition.cnn.com/2018/10/08/economy/imf-bali-world-bank/index.html
    What is really happening is that Trump is effectively addressing US colossal debt and deficits by making it attractive to A US businessmen and investors to invest in the US instead of in other countries and tax havens. The result is a flow into the US of money from all over the world causing a dramatic drop in value of all currencies except the US and catastrophic falls in the value of the most exposed currencies.
    What is being dramatically demonstrated to anyone with their eyes open and their brain engaged is the disaster that was always inevertable to any nations abandoning control of their currency exchange rates and the management and control of their nation’s international trade in the name of financial globalisation .
    The winners have been a tiny few individuals and companies. The losers have been all nation states and almost all their people , and for the strongest nation to recover it’s economic viability as a state is going to destroy most of the other states. Those that have been shut out of trade by sanctions are the lucky ones.
    The trouble is that Bankers and multinationals have the monopoly of understanding what’s going on. Politicians mostly haven’t a clue.
    D J S

  8. Sam Sam says:

    Looks like Japan’s Prime Minister Shinzo Abe is trying to woe the UK brexit fears into the TPP11 so he can bust open Japan’s war economy kept sealed since WW2 and for good reason. Japan and the U.K. still the same problem as before. Resource poverty. Japan and UK has to import so many things, including the materials to make a modern war machine work.

    Japan has excellent healthcare, this is like kryptonite to the U.K. Japanese conservatives get the total zero-regulation corporate wet dream. All of a sudden insane worker exploitation, overtime without pay, wage caps for non executive employees, removal of maximum hour work week regulation, blacklisting, and inability to quit due to workplace conditions are a thing within the U.K. Dodged a bullet with The U.S, why not play Russian roulette with the U.K.

    Japan also has few qualms with little sissy liberal shit like killing whales, eradicating natural areas and waterways, overfishing until places within the ocean are barren…, it’s a match made in heaven.

    Of course I would expect a half decent New Zealand trade delegation would ring em out with annoying good judgments and say this is the Pacific.

    https://www.ft.com/content/57c4e3ce-ca22-11e8-b276-b9069bde0956?segmentId=9446edae-990e-5ea1-dc09-0e1544fde7e3&segment_detail=Story7BrexitAPAC-AU