Thread by @scottlincicome

A thread on NAFTA 2.0's Good, Bad & Ugly:
First, a BIG caveat: there's a lot here, & it'll take time to draw definitive technical conclusions (esp given how the agreement is posted ustr.gov/trade-agreemen…). These are just initial opinions & subject to change as details emerge /1

The Good:
1) as @JimPethokoukis rightly points out (aei.org/publication/tr…), this is generally a victory for pro-trade/globalization forces. NAFTA's basic free(r) trade principles (goods & services) remain, & uncertainty is reduced (tho not eliminated, yet). /2

2) there's actually some trade liberalization in this deal! (Crazy, I know) Canada opens its dairy market a little (keyword: a little - 0.34%); the US in exchange opens up a little on dairy, peanuts, & sugar. Good for consumers (tho not ideal free trade). De minimis raised too /3

3) NAFTA was old and needed updating; this deal - just like TPP (more on that later) - includes new, relatively-uncontroversial "modernization chapters" on things like SMEs, e-commerce, non-tariff barriers, etc. Needed to be done, tho one can quibble on the margins. / 4

4) Finally, it seems (see caveat above) the USA's WORST demands - procurement, mandatory US content, 5-yr sunset, guest worker visas, "seasonal" trade remedies, safeguards, etc - were either removed entirely or softened to the pt of being practically harmless. /5

4, ctd) I imagine the US dropping these demands, perhaps more than anything else, is why the deal (which looked dead) got done. Remove the "poison pills," and the bad/ugly stuff is annoying but (probably) worth nixing the uncertainty & keeping NAFTA alive /6

Now, the Bad:
1) Ex investment, the deal includes (and in some cases even expands) many of the "regulatory" FTA provisions often criticized by free marketers bc they are intrusive, costly or even protectionist: labor, environment, IPR, etc. Some like IP go beyond TPP /7

1, ctd) Whether you like these things or they're dealbreakers is really gonna depend on your litmus tests & the specific provisions. For me, I don't see anything in these chapters (so far!) that makes me hope the deal dies in Congress. /8

2) The deal doesn't kill most of the protectionism NAFTA left. Eg, many US/Canada agriculture (even dairy) restrictions; services & investment "non-conforming measures" (incl the US Jones Act, sigh). Big missed oppty to *expand* trade in a once-a-generation negotiation / 9

2, ctd) It also doesn't fix NAFTA's broken dispute settlement system worldtradelaw.typepad.com/ielpblog/2018/…
(Grumble: maybe if certain parties weren't so focused on making the deal more protectionist, arguing abt "national security" & tweeting insults, they could've fixed this stuff. Bah.) /10

3) The 232 side letters. Yes, quota levels are so high 232 tariffs might never apply to Can/MX autos/parts, but cmon: these are still quotas that still contemplate NATIONAL SECURITY tariffs on CARS in the NA supply chain. That's bad on multiple (law, econ, principle) levels /11

3, ctd) And the 60-day "consultations" letters implicitly accept a finding that NATIONAL SECURITY TARIFFS could apply to close allies and integral parts of our industrial base. I get the politics, but, systemically, this stinks. This shld be a blanket exemption. Full stop. /12

Finally, the Ugly:
1) Rules of Origin. The automotive ROO are managed trade on steroids, requiring originating (duty free) vehicles/parts to have high levels of not just total regional content, but also steel/aluminum purchases, & "high wage" labor. Many other onerous regs. /13

1, ctd) Libertarian principles aside, this will likely decrease the competitiveness of the NA auto sector, accelerate offshoring of small car production & increase consumer costs. It also creates new precedent for other US FTAs & cements these rules into the NA supply chain. /14

2) The glaring omission: US steel/aluminum NATIONAL SECURITY tariffs, plus Can/MX retaliation, remain in place. So the pain (for almost everyone) continues, even though Trump got his "trade deal" - wasn't that the point? I guess not (not yet at least). /15

BIG PICTURE: By no means is this a perfect (even great) update to an old FTA. BUT it's not devastating, maintains free-ish trade in most goods/services, modernizes, and reduces uncertainty. YES, Trump caused the uncertainty, but it's better than where we were 2 mos ago /16

Some of the worst provisions, moreover, are delayed or just side letters or could be amended in the future (ROO by proclamation in the USA). Seems Can/MX "caved" in that they found a deal they could live with and just wanted Trump to Leave North America Alone. OK. /17

For the US, it's a missed oppty to liberalize further & probably makes us less competitive. But the bigger issue is: was the last 21 mos of uncertainty/hostility worth what's basically "NAFTA+TPP+minor good/bad changes" when you could have just had TPP (maybe even amended)? /18

Seems obvious to me the answer is "no," especially since we're now gonna do the same song-and-dance with Japan and will (for now) miss out on the TPP's much-larger AsiaPac integration (and China balancing - the clear, unstated pt of much of this). /19

Meanwhile, the 232 tariffs/retaliation remain, & POTUS may be emboldened to use more "national security" threats to get "deals" that are worse than what we could've had BUT help him politically (at our allies' & long-term expense).

That may be the worst USMCA precedent of all /x