10/16/2018 – Forbes
Harry G. Broadman
The victory proclaimed by the Trump Administration for its renegotiation of a “modernized” North American Free Trade Agreement (NAFTA) is a hollow one. Despite many months of wrangling with our closest neighbors to the North and South of us—our second and third largest trading partners—in fact, few substantive changes have been introduced to the 1994 pact.
That hasn’t stopped the White House from touting the deal. Why? Because Mr. Trump and his trade team see NAFTA 2.0 as the model to tame nations outside our hemisphere—especially the use of it as the vehicle to proliferate a poison pill lying at the heart of the agreement the U.S. wants to be deployed to corner China and clip its wings from engaging in pernicious trade practices.
But there are two fundamental barriers to this scenario playing out. First, Washington will find it tough going to sell this framework to countries with whom there isn’t a pre-existing agreement similar to NAFTA to be amended. Second, as a practical matter, the U.S.-inserted Chinese poison pill will turn out to be of little therapeutic value, not only in failing to coerce other countries to exercise this provision but to actually induce changes in Beijing’s trade policy conduct.