The USMCA agreement and the USA foreign policy

In Donald Trump’s presidency the United States has taken a turn in its foreign policy, changing the prevailing paradigm after World War II. Having taken the position of one of the winners in the conflict and a position of world power, the US sponsored the creation of the Bretton Woods institutions: the World Bank, the International Monetary Fund, the gold-dollar exchange rate, and the GATT (General Agreement on Tariffs and Trade). In his speech at the UN General Assembly, Trump was explicit in saying that the US is not “globalist” anymore (a strand of liberal thought in international relations), but actually centered in its national interests. The USA took on a stance never seen since the end of World War II. It leaves behind its role as conflict mediator and as a “stabilizer” in international relations (as we see in the case of deciding to support the transference of the Israeli capital to Jerusalem by setting the US embassy in the city) to act in sole benefit of its national interests and the preservation and expansion of its power around the world. Such a stance is the result not only of the ascension to power of a leadership with said purpose, but mainly of an intense internal dispute in the American bureaucratic establishment after the thesis defended by the Pentagon is favored in opposition to the perspective held by the US Department of State. All of the alliances are open to questioning and changes to maximize the advantages given to the USA are on the table. And the USA is likely to interfere with every chess board to secure its supremacy.

Having such alignment in mind it is possible to understand the US leaving the Trans-Pacific Partnership, the Paris Climate Agreement and the Iran Nuclear Deal, and also the trade war with China, the protectionism in the steel and aluminum indutries (which has affected many countries, including close allies, as the Europeans and Canada), and the revision of Nafta, recently concluded with the adhesion of Canada to the initial USA-Mexico deal. The trade bloc was renamed USMCA (United States-Mexico-Canada). Differently from Nafta, that had undetermined validity date, USMCA is going to be in effect for 16 years (the USA vowed for five, but Mexico and Canada did not accept it) and there will be a revision in 6 years to decide if there will be an extension. The automobile industry will be the most affected with a gradual increase from 62,5% to 75% of parts having to be made within the bloc. At 16 dollars an hour of work at minimum (value above what is paid in Mexico) to part of the production, factories will have to be transferred from Mexico to the USA and Canada, measure which conforms to Trump’s discourse on reindustrializing the USA (since it has lost many factories in the last few decades because of the chase for lower costs) benefitting the country’s workers and economy in place of Mexico’s workers and economy. The agreement has also established more protection to intellectual property, of interest to the US, and in a concession of Washington accepted the Canadian demand to maintain the dispute resolution board, something with which Ottawa has been able to overcome potential blocks to its timber exports to the USA.

The USA automobile industry was against the alteration moved to the sector. The sector argues that it will be burdened by higher costs and that it will be less competitive. Many North American economic sectors have been organizing in lobbies to defend free trade with similar argumentation, that of protectionism as hamrful to the economy and to the country as a whole. However, the US federal administration has been putting the country’s long-term interests above the demands coming from industries, even if they cause potential losses to certain sectors. Given the USA market size and power to push for its interests, Mexico and Canada made efforts to reduce damages. And Trump, in the speech announcing USMCA, criticized the supposed difficulties of North American companies to operate in Brazil, something that may point to protectionist measures.

 The United States is for a fact not a defender of the world liberal economic order anymore. All countries will be affected to greater or lesser degree by this and will have to think of their insertion strategies in the international economy, but this time not with lens from the 90’s and its “unstoppable globalization” that promised benefits to all that joined it. The ones that joined by following Washington’s liberalizing intents lost, as was Latin America’s case, which has shown in the last thirty years low rates of growth. In the Far East there are examples of countries that decided to follow a different path and had more success, grew more and modernized their economies and societies. And among these, there rises China as an economy that presents itself to overcome the North American economy in the next few decades. The USA, therefore, acts aggressively in all of its fronts and abandons international agreements in the name of preserving its position in relation to the world. And the USMCA, as highlighted, is one more pawn in this game of global powers.