AFTER MONTHS OF DISCUSSION AND BACK AND FORTH, UNITED STATES
MEXICO CANADA AGREEMENT HAS BECOME LAW.
WHAT IMPACT WILL IT HAVE AND WHAT ARE THE BROADER
IMPLICATIONS ON TRADE?
I SPOKE WITH AMERICAN INTERNATIONAL COLLEGE ECONOMICS
PROFESSOR JOHN ROGERS TO FIND OUT MORE.
>> WELL, IT WOULD TAKE A WHILE, BUT I THINK THERE WAS A LOT OF
SUBSTANCE TO THOSE NEGOTIATIONS AND I THINK THE OUTCOME IS
PRETTY POSITIVE ALL THE WAY AROUND.
THERE ARE CERTAIN PEOPLE NOT HAPPY WITH IT, SENATOR TWOMEY
WHO HIS A FREE TRADER VOTED AGAINST IT.
SO I THINK YOU COULD QUIBBLE WITH THE FACT THAT IT'S NOT A
PURE TREE TRADE AGREEMENT, IT HAS A CERTAIN NUMBER OF
RESTRICTIONS.
BUT OVERALL I THINK IT'S A GOOD THING FOR US, MEXICO AND CANADA.
AND THE DANGER WAS, AND TO ANSWER YOUR QUESTION WHY IT TOOK
SO LONG, THERE WERE SOME ISSUES THAT COULD ARE BOGGED IT DOWN
AND PREVENTED US FROM HAVING A CONTINUATION OF NAFTA.
>> WHAT'S ONE OF THOSE THAT WAS RESOLVED?
>> PROBABLY THE BIGGEST ONE IS THE AUTOMOBILE INDUSTRY, BECAUSE
AS YOU KNOW MEXICO IS A VERY SOPHISTICATED AUTOMOBILE
INDUSTRY, IF YOU WALK INTO A FORD PLANT IN MEXICO IT'S NO
DIFFERENT FROM A FORD PLANT HERE.
BUT THE PEOPLE ARE MAKING $5 AN HOUR VERSUS $40 AN HOUR.
SO THERE'S A REAL INTEREST OR A REAL NEED FOR THOSE COMPANIES TO
OUTSOURCE THEIR PRODUCTION.
AND THAT WAS A BONE OF CONTENTION, PARTICULARLY
OBVIOUSLY WITH THE UNIONS BUT ALSO WITH THE DEMOCRATIC PARTY.
SOME PEOPLE LIKE SENATOR SHERROD BROWN OF OHIO LED THE CHARGE TO
MAKE SURE THAT THERE ARE PROTECTIONS FOR THE AMERICAN
WORKERS, BUT ALSO FOR THE MEXICAN WORKERS.
SO ONE OF THE PROVISIONS IS, I BELIEVE IT'S 40% OF THE CONTENT
OF A CAR HAS TO BE MADE BY PEOPLE EARNING MORE $16 AN HOUR.
SO A CAR NOWADAYS, YOU SAY IT'S AN AMERICAN CAR, IT COMES OUT OF
AN ASSEMBLY LINE IN DETROIT, BUT A BIG CHUNK OF IT IS MADE
ELSEWHERE.
AND IT'S JUST ASSEMBLED IN DETROIT.
SO THIS WAS AN IMPORTANT STICKING ITEM, AND I THINK THE
OTHER BIG ONE IS WITH CANADA, THE TARIFFS ON THE DAIRY, THE
ALUMINUM, STEEL.
AND SOME OF THE AUTO ISSUES IN CANADA AS WELL.
>> YES.
THIS WAS LARGELY HERALDED AS A WIN FOR PRESIDENT TRUMP, IT WAS
CERTAINLY SOMETHING HE CAMPAIGNED ON.
HE WAS NOT SHY ABOUT HATING WHAT HE CALLED THE OLD NAFTA.
DO YOU REGARD IT AS A WIN FOR THE PRESIDENT?
>> I THINK SO.
BUT I THINK ALSO, TO BE HONEST, YOU'D HAVE TO SAY, AND I THINK
MAYBE WE SAID THIS WHEN WE FIRST TALKED ABOUT IT, THAT IT'S SORT
OF NAFTA 2.0.
IT REALLY IS A CONTINUATION OF NAFTA WITH SOME ADJUSTMENTS.
IT'S REALLY NOT ALL THAT DIFFERENT, WHICH I THINK MOST
BUSINESS PEOPLE AND MOST ECONOMISTS WOULD SAY THAT'S A
GOOD THING.
AT LEAST WE KEPT THE NORTH AMERICAN MARKET, EACH COUNTRY
CAN SPECIALIZE TO A CERTAIN DEGREE IN WHAT IT'S GOOD AT.
EVERYBODY WINDS UP BEING BETTER OFF, THAT'S WHAT FREE TRADE IS
ALL ABOUT.
IT JUST HAS MORE RESTRICTIONS THAN THE ORIGINAL AGREEMENT.
>> LOOKING AT THE DEMOCRATIC SIDE, ONE AREA WHERE DEMOCRATS
DUG IN THEIR HEELS AND WERE SUCCESSFUL WAS LOOKING AT
PROTECTION FOR DRUG COMPANIES, AND THAT ISSUE.
LESS PROTECTION, I SHOULD SAY, WAS WHAT THEY VIED FOR AND GOT.
WERE YOU SURPRISED THAT THEY WERE ABLE TO WIN ON THAT
PARTICULAR ASPECT OF IT?
>> WELL, I THINK THERE'S A FEELING THAT MAYBE THE TRUMP
ADMINISTRATION GAVE IN A LITTLE BIT TOO MUCH ON SOME OF THESE
THINGS.
BUT I THINK THAT'S WHAT THEY HAD TO DO TO GET THE SUPPORT.
IT PASSED BY I THINK 89 SENATORS VOTED FOR IT.
SO PRETTY SOLID SUPPORT FOR THE AGREEMENT.
>> AND IT'S NOT JUST THE UNITED STATES INTEREST HERE, CANADA AND
MEXICO FOR THEIR PARTS HAD TO AGREE AS WELL.
SO IT'S VERY COMPLEX IN TERMS OF GETTING THE BUY-IN OF ALL THESE
DIFFERENT POLITICAL CONSTITUENTS.
>> YES.
WE WERE LUCKY IN THE SENSE, I THINK THERE WAS SOME CONCERN THE
NEW MEXICAN PRESIDENT WAS KIND OF A LEFT WING, COMES OUT OF
ESSENTIALLY ANTI-AMERICAN PRACTICE DIGS IN MEXICO.
BUT HE WAS VERY COOPERATIVE, AND REALLY WANTED THIS AGREEMENT,
AND MEXICO ACTUALLY RATIFIED IT BACK IN JUNE, I BELIEVE.
SO THEY WERE SORT OF ON BOARD AND THEY WERE WILLING TO MAKE
THE CONCESSIONS TO MAKE IT HAPPEN.
I THINK CANADA, THERE WAS SORT OF A KURFUFFLE WITH TRUDEAU AND
PRESIDENT TRUMP, THEY HAD A FALLING OUT AND THEY MIGHT ARE
CONFUSED THE NEGOTIATIONS, BUT THOSE WERE PRETTY CONTENTIOUS
NEGOTIATIONS.
AND I THINK THE WOMAN WHO IS NOW THE DEPUTY PRIME MINISTER,
CHRISTA FREELAND, DID A GOOD JOB OF HANGING IN THERE AND SAYING
WE HAVE TO HAVE AN AGREEMENT.
CANADA STILL HASN'T RATIFIED IT BECAUSE TRUDEAU LOST HIS
MAJORITY, SO NOW THEY HAVE TO DO SOME HORSE TRADING WITH THE
CONSERVATIVE PARTY AND THE NEW DEMOCRATIC PARTY IN CANADA IS
AGAINST IT.
I THINK EVERYBODY FEELS IT WILL GO THROUGH, BUT THEY'VE GOT TO
GO THROUGH THAT PROCESS.
>> IN TERMS OF IMPACT, WHEN YOU LOOK AT IMPACT ON THE
INDUSTRIES, WHETHER IT'S THE MANUFACTURING, THE DRUG SECTOR,
THE DAIRY SECTOR, IS THERE ONE OF THOSE THAT YOU CAN POINT TO
THAT YOU FEEL LIKE THIS WILL HAVE THE MOST SIGNIFICANT IMPACT
ON?
EITHER POSITIVE OR NEGATIVE.
> I THINK IT'S VERY IMPORTANT FOR THE AUTOMOBILE INDUSTRY,
BECAUSE WE DO HAVE A NORTH AMERICAN MARKET AND THAT'S A
LONG STANDING, IT STARTED WITH CANADA AND THEN IT MOVED IN THE
70'S AND THEN IT MOVED TO MEXICO.
SO IT'S GREAT TO PRESERVE THAT, EVEN THOUGH THERE ARE SOME
RESTRICTIONS, THAT'S IMPORTANT.
I THINK AGRICULTURE, PEOPLE DON'T REALIZE THAT WE DO A LOT
OF EXPORT TO MEXICO AND WE IMPORT THINGS LIKE AVOCADOS AND
TROPICAL FRUIT.
SO I THINK IT'S A VERY BENEFICIAL, A NATURAL SYNERGY
BETWEEN WHAT WE MAKE AND CAN EXPORT TO THEM AND WHAT THEY
MAKE AND CAN EXPORT TO US.
I THINK AFTER NAFTA FIRST WENT IN, PEOPLE TALKED ABOUT THE
DISLOCATION TO SOME OF THE AMERICAN BUSINESSES,
PARTICULARLY MANUFACTURING, THAT MOVED DOWN TO MEXICO.
BUT A LOT OF THE AGRICULTURE JUST WASN'T COMPETITIVE.
AND MEXICO IS A HUGE, OBVIOUSLY, CONSUMER OF CORN AND BEANS AND
THINGS LIKE THAT.
SO THOSE ALL COME FROM THE UNITED STATES, OR A BIG PORTION
OF THEM.
SO IT'S BEEN GOOD FOR THE MEXICAN CONSUMER, NOT SO GOOD
MAYBE FOR THE MEXICAN FARMER.
BUT IT'S GREAT FOR THE AMERICAN FARMER BECAUSE THOSE ARE BIG
EXPORT MARKETS, AND I ANY A LOT OF PEOPLE IN THE AGRICULTURAL
SECTOR, YOU HEAR ABOUT SOYBEANS GOING TO CHINA, BUT I THINK IT
IS EQUALLY IMPORTANT, PORK AND MANY AGRICULTURAL, CORN AND
AGRICULTURAL PRODUCTS GOING TO MEXICO.
>> YOU TOUCHED ON MEXICAN CONSUMERS.
WHAT DO YOU THINK THE IMPACT IS FOR U.S. CONSUMERS?
>> FREE TRADE, THAT'S BASIC ECONOMICS, IT'S A GOOD THING.
YOU GET MORE VARIETY OF LOWER PRICES.
BUT THE BENEFITS ARE WIDESPREAD, THE DAMAGES ARE FOCUSED ON A
PARTICULAR COMPANY OR PARTICULAR TOWN OR PARTICULAR FACTORY.
SO I THINK PEOPLE LIKE STEVE BANNON HAVE SAID WHY WAS TRUMP
ELECTED, EVERYBODY WAS SO SURPRISED, IT'S BECAUSE HE
CARRIED THE MIDWEST, WHY DID HE CARRY THE MIDWEST, BECAUSE HE
WENT TO PLACES LIKE INDIANA WHERE THEY WERE CLOSING THE
CARRIER PLANT, THE AIR CONDITIONERS ARE GOING TO BE
MADE IN MEXICO, NOT IN INDIANAPOLIS.
THE BLUE COLLAR VOTER WHO WOULD NORMALLY VOTE DEMOCRATIC, WENT
FOR TRUMP.
AND THAT'S WHY HE WON THE ELECTION.
SO YOU'VE GOT TO GIVE POLITICS ITS DUE, I MEAN IT'S OUR SYSTEM,
AND PEOPLE VOTE THEIR SELF INTEREST.
BUT I THINK THE GOOD NEWS IS THAT THE OVERALL BENEFITS
OUTWEIGH THE COSTS, AND WE'VE GOT AN AGREEMENT THAT WILL WORK.
>> LET'S TAKE A LOOK AT SOME OTHER AREAS OF INTEREST, WE
TOUCHED ON IT ON THE PROGRAM BEFORE.
BREXIT, THE IMPACT THAT THE REALITIES OF BREXIT NOW IN THE
POST BREXIT WORLD THAT WE'RE IN NOW.
>> I THINK THE IRONY OF BREXIT IS THAT THE BRITISH WANTED OUT
OF THE POLITICAL PART OF THE EUROPEAN UNION, BUT THEY DON'T
REALLY WANT OUT OF THE FREE TRADE AGREEMENT.
SO THEY'VE GOT BETWEEN NOW AND DECEMBER 31 TO FIGURE OUT HOW
THEY CAN SOMEHOW OR OTHER STAY IN THE FREE TRADE AGREEMENT,
EVEN THOUGH THEY'RE OUT OF THE SOCIAL POLICIES AND THE
POLITICAL ASPECTS OF THE EUROPEAN UNION.
AND I DON'T THINK IT'S ENTIRELY CLEAR TO ANYBODY HOW THAT'S
GOING TO WORK OUT.
BECAUSE THE WHOLE IDEA OF THE EUROPEAN UNION IS YOU'RE IN IT,
YOU GOT FREE TRADE, BUT WITH THAT GOES FREE MOVEMENT OF
PEOPLE, FREE MOVEMENT OF CAPITAL.
THE BRITISH WANT THE FREE TRADE, BUT THEY DON'T WANT THE FREE
MOVEMENT OF PEOPLE.
>> THEY -- >> THEY DON'T LIKE ALL THESE
PEOPLE COMING FROM ROMANIA AND EASTERN EUROPE, AND SO THE FREE
MOVEMENT OF PEOPLE IS SOMETHING THEY OBJECTED TO, BUT THE
BRITISH ECONOMY DEPENDS ON THE FREE TRADE.
I THINK BORE IS JOHNSON FEELS HE CAN GET SOME KIND OF A DEAL WITH
THE UNITED STATES.
I'M NOT SURE THAT'S GOING TO BE AS EASY AS HE THINKS IT IS.
>> IF WE LOOK AT CHINA NOW, THE "NEW YORK TIMES" REPORTED THAT
CHINA WOULD REDUCE ITS TARIFFS TO $75 BILLION WORTH OF MESH
GOODS, BUT THAT THE LARGER STICKING POINT THERE THAT
PRESIDENT TRUMP HAS OFTEN TALKED ABOUT IS THE PROMISE THAT CHINA
HAS MADE TO BUY AN ADDITIONAL $200 BILLION OF AMERICAN MADE
GOODS OVER THE NEXT TWO YEARS.
WHAT ARE YOU GOING TO BE WATCHING FOR IN THIS PARTICULAR
TRADE SITUATION?
>> WELL, I THINK THEY'LL WATCH TO SEE IF THEY ACTUALLY DO IT,
AND OBVIOUSLY THINGS ARE NOW KIND OF IN A MESS BECAUSE OF
THIS VIRUS.
CHINA IS PRETTY WELL CUT OFF FROM THE REST OF THE GLOBAL
ECONOMY.
BUT ASSUMING THAT GETS SORTED OUT, FOR EXAMPLE, CHINA IS A
HUGE CONSUMER OF PORK.
AND THEY HAVE A PROBLEM BECAUSE THEY HAVE A VIRUS OR A DISEASE
FOR PORK, SO THEY NEED TO IMPORT PORK FROM US.
SOYBEANS, OBVIOUSLY.
SO THERE'S A NATURAL MARKET AND NATURAL INTERCHANGE BETWEEN OUR
AGRICULTURE AND THEIR NEEDS, JUST AS WE NEED THEIR
MANUFACTURED PRODUCTS.
SO I THINK THAT WILL WORK OUT FINE
THE TRICKY PART OF IT IS THE PHASE TWO, WHICH IS GOING TO
ADDRESS THE BASIC NATURE OF THE CHINESE ECONOMY, WHICH IS IT'S A
CAPITALIST SYSTEM WITHIN OR GRAFTED ONTO A COMMUNIST
AAUTHORITARIAN SYSTEM, AND THE GOVERNMENT STILL CONTROLS CHUNKS
OF THE ECONOMY.
THEY HAVE STATE OWNED COMPANIES, THEY CONTROL THE BANKS, AND
THAT'S ONE OF THE IDEAS THAT WE'RE NEVER GOING TO HAVE A
LEVEL PLAYING FIELD AS LONG AS THAT'S THE CASE, BUT THAT GOES
RIGHT TO THE HEART OF THE CHINESE SYSTEM.
SO THAT WILL BE A TOUGH NEGOTIATION.
BUT I DON'T THINK THAT WILL HAPPEN UNTIL AFTER THE
ELECTIONS, SO WE'LL STAY TUNED.