After more than a year of intense negotiations, Canada, Mexico and the United States have agreed on a trilateral trade deal to replace the North American Free Trade Agreement, a nearly 25-year-old pact that has been excoriated by U.S. President Donald Trump as the "worst trade deal ever." While the leaders of all three countries applauded the new agreement — Trump with typical hyperbole called it "the most modern, up-to-date and balanced trade agreement in the history of our country" — the United States-Mexico-Canada Agreement (USMCA) is in fact a revised version of NAFTA, leavened with dollops of the Trans-Pacific Partnership.
The new deal should not prove disruptive to existing trade — good news for Japanese automobile manufacturers that invested heavily in NAFTA — but the negotiating process is worrying. The U.S. bluffed and bullied, setting a troubling precedent for future trade talks, and one that Japan must prepare for as Tokyo commences negotiations with Washington as recently agreed.
NAFTA was outdated — the world has changed a lot in a quarter century — and the USMCA includes major changes to key provisions on rules of origin, labor and environmental standards, intellectual property rights protections and dispute resolution. It also addresses trade in digital products — virtually nonexistent when NAFTA was first agreed — as well as currency manipulation.