Amid street demonstrations, a resurgence of COVID-19 and election posturing, it was possible to overlook one development that flew under the radar earlier this month.
Beginning July 1, the United States-Mexico-Canada Agreement, known as USMCA, replaced the North American Free Trade Agreement. For 25 years, NAFTA had set the rules for free trade among the three North American economies, but President Donald Trump made the treaty’s demise a central goal of his presidency.
The outcome is important for St. Joseph, which still maintains status as an important city for industrial and agricultural exports. The U.S. Commerce Department reports that exports from the St. Joseph metropolitan area rose in value from $284 million in 2005 to $677 million in 2018.
The concern was that Trump’s distaste for NAFTA, which he considered a bad deal, would leave local businesses and agricultural producers in worse shape if the old agreement was allowed to expire without a replacement.
The USMCA removes that uncertainty with two major trading partners, putting in place a new arrangement that requires more components and raw materials in the automotive industry to come from North America. USMCA also sets stricter labor standards, with a new rule for nearly half of each automobile to be made by workers making at least $16 an hour.
As with NAFTA, the new trade agreement can’t be neatly summed up into winners and losers. St. Joseph lost its share of manufacturing jobs in the 2000s, though it’s debatable how much was from NAFTA or how much was from China’s rise or changes in technology. In the end, U.S. workers are likely to benefit from USMCA while consumers will pay more because of the new standards for automotive production.
For area farmers, USMCA will come as a relief at a time of unsettled prices and livestock markets due to COVID-19. Last week, the U.S. Agriculture Department reduced this year’s national estimate of corn acreage by 5%, a significant decrease that reflects the degree of uncertainty right now.
Producers, who are a key to the local economy, made out well with NAFTA. Corn exports to Mexico increased 600% from 1990 to 2016, according to Missouri Farm Bureau.
Any trade deal is only effective if the signatory countries follow the rules, and USMCA is surely to become a political punching bag just like its predecessor. That’s how things work, but those who see the U.S. as a constant victim of trade should realize that St. Joseph’s export values peaked at $1 billion in 2015 and then declined after tensions arose with trading partners.
On the whole, our workers, businesses and farmers don’t need protection as much as a chance to compete in free markets. Hopefully, USMCA provides that.