The good, the bad – and the "precarious." That's how one policy group is grading the merits of President Donald Trump's U.S., Mexico and Canada (USMCA) trade agreement.
"A lot of the USMCA is pretty similar to NAFTA," says Tori Whiting of The Heritage Foundation, which did an extensive analysis of the agreement negotiated by the Trump administration. "It maintains a lot of the tariff-free treatment for scores of goods and services, so that's a good thing – [and] it also does one of the chief 'asks' The Heritage Foundation had, which is having a keen eye on modernization."
NAFTA dates back to the George H.W. Bush and Bill Clinton administrations, so Heritage wanted to ensure this new agreement world be prepared for the 21st century.
"I think that the Trump administration hit a good chord in that area in regard to digital trade and intellectual property protection," Whiting adds. "On the flip side, we do have some concerns in some significant areas."
One area involves "rules of origin," which are rules that dictate how much of a good has to be made in North America to be not charged a tariff.
"In that category they increase the margin, which we think will be bad for business," Whiting explains. "They also impose a minimum wage standard which is $16 per hour for 40 percent of the production process, and they also imposed a new steel and aluminum requirement saying that 70 percent of all the steel and aluminum used in auto production has to be of North American origin."
The second area of concern is on labor.
"Heritage has long advocated that labor regulations are not appropriate for trade agreements," Whiting says. "Trade agreements should be about trade, not about domestic policies like labor; and this agreement actually pulls labor requirements into the larger agreement, whereas they used to just be a side letter in NAFTA."
Meanwhile, Whiting says the USMCA has "some precarious provisions having to do with social policy," specifically sexual orientation and gender identity (SOGI). "Trade agreements are not the way and not the place to determine social policy," she states.
Environmental standards are also in the USMCA. "That's domestic policy and that should stay away," Whiting maintains.
Whiting says it's important for people to pay attention to these issues.
"They're important because they're meaningful for people," she stresses. "When we increase rules of origin, that could make it more expensive to produce a car, which could make it more expensive for Americans when they're buying a car. Those are the real-world impacts we want to make sure are getting highlighted."
So is the USMCA better or worse than NAFTA?
"I think that's still to be determined," answers Whiting. "What we have now is a signed agreement between the United States, Mexico, and Canada, but Congress has to have their role in this process. If any of the issues that we identified as concerns are made any worse by the Democrats, that would be cause for concern."
Read Whiting's related article: An Analysis of the USMCA