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President Trump presents his new North American trade agreement as "the most important trade agreement in US history" – an agreement that would restore lost manufacturing jobs in the United States, discourage future workmanship of factory work and "to send funds and jobs United States."
But many economists and trade experts believe that the president's forecasts may prove too optimistic, given the limited changes envisaged and the powerful economic forces that have already restructured regional trade. While some industries and regions would emerge better than others, the size of the US economy, which amounted to $ 20 trillion, was likely to overwhelm these specific effects.
The agreement, which the president has dubbed the US-Mexico-Canada Agreement, would force automobiles to include more North American parts to qualify for duty-free treatment, to open the Canadian dairy market a bit and to update the business rules of the Internet economy.
[Trump says trade deal proves tough talk and tariffs work]
All this earned the administration Monday praise from business groups, farmers, investors and even some Democratic lawmakers. But the president's infatuation for "high-quality US jobs" paving the way for "a new era for the US auto industry" contrasted with the relatively moderate valuations of professional economists.
"It's not a revolutionary agreement. It's a modification of an agreement already in place, "said Eric Winograd, a leading American economist at AllianceBernstein, an investment and research firm. "The total economic impact will be very small. I do not think it will stimulate the American economy. "
To the extent that it could generate growth, the deal would do so by removing the uncertainty cloud created by Trump by disrupting global trade, some economists said. This climate of doubt may have dampened investment – so the new deal could add a tenth of a percentage point to the economy's growth rate next year, "said Chris Rupkey, chief financial economist at MUFG Union Bank.
"We view this NAFTA agreement as a marketing exercise," Rupkey said. "The harsh words war of Trump's economic team terrified markets, consumers and businesses for a while, but what the United States got was far more modest than the war of words angry seemed to demand. "
On Wall Street, the Dow Jones Industrial Average advanced Monday about 193 points, less than 1%, to close at 26,651.21.
Trump celebrated the new agreement with a ceremony at the White House Rose Garden during which he provided enhanced labor protection and made it easier for American farmers to sell to Canadian customers.
[Canada avoids a doomsday trade scenario. But is it a win?]
Other provisions would update regional trade rules for a 21st century economy, bringing significant clarity to e-commerce retailers as well as data-rich industries such as financial services.
Even some left-wing economists felt that the president had improved existing trade negotiations.
"I would say this agreement is an improvement, although law enforcement may or may not create that impression," said Jared Bernstein, former economic advisor to Vice President Joe Biden.
The administration will likely be facing a bitter struggle to get congressional approval next year, when the House of Representatives could be controlled by the Democrats. The fact that President Bill Clinton promoted the North American Free Trade Agreement in 1993 will be one of the pillars of the White House campaign.
"We all tend to overestimate the impact of trade agreements," said Mickey Kantor, who led the Clinton Administration's sale speech for NAFTA, which the new Trump agreement would replace. "You do this for political reasons. But all we do is open ourselves to criticism and look bad. "
While economists and trade analysts analyzed the more than 1,800 pages of the new deal, they saw little sign of major change.
Lorenzo Caliendo, professor of economics at the Faculty of Management at Yale University and co-author of a NAFTA study published in 2015, concluding that every American earned about $ 45 by the treaty, said the new agreement would not, of course, "give up" a significant number of manufacturers. jobs in the United States.
Limited differences between new and old treaties, coupled with changes in the US labor force over the last quarter century, would minimize economic benefits, Caliendo said. According to Caliendo, much of the work done in Mexico since 1994, when the original agreement came into effect, would be ill suited to the more skilled American workforce of today. ; hui.
"I'm expecting very little global effects," he wrote in an e-mail.
[Wonkblog: Who are the winners and losers of the ‘new NAFTA’?]
Some of the gains may be important for individual industries or farmers but may not make much difference in the overall economy. The president has particularly criticized Canada's dairy management system, which limits imports to protect the incomes of domestic farmers and is particularly irritating to US producers in states like Wisconsin.
As the last issue to resolve, Canada has agreed to open about 3.5% of its dairy market to US farmers.
The auto industry would be facing some of the biggest adjustments, illustrating how the deal would create winners and losers. The new agreement is generally expected to increase vehicle costs and create heavier paperwork requirements, particularly for Tier 1 and Tier 2 suppliers that fuel major automakers such as General Motors and Ford.
The Trump administration aims to send jobs back to the auto industry in the United States. To encourage this, the new agreement stipulates that at least 75% of a vehicle – compared to 62.5% today – must be produced in the NAFTA region in order to benefit from Treatment without duties. Another new provision provides that at least 40% of every car is made by workers earning $ 16 an hour, which is well above the average factory wage in Mexico.
"The new deal makes it more difficult to assemble a car in Mexico, export it to the United States and meet its requirements," said Chad Bown, principal investigator at the Peterson Institute of Petroleum. 39, international economy.
At the same time, he said, "automakers are also less able to buy cheaper parts from European or Asian suppliers".
Kristin Dziczek, of the Michigan Center for Automotive Research, predicts that "tens of thousands" of jobs could be recovered from the 375,000 lost in the last two decades, but that American consumers would see sticker prices rise. from $ 470 to $ 2,200 per vehicle.
But if the agreement can create additional jobs in the US and Canada in the short term, companies could over time seek to reduce their costs by using more robots in their factories.
"We do not anticipate an increase in employment in the US auto manufacturing sector. On the contrary, this will translate into a breakthrough in the use of robotics and automation in Mexico, "said Joseph Brusuelas, chief economist of the RSM audit firm.
Such judgments are shared by key democrats. Sander Levin (D-Mich.), A leading spokesperson on trade policy, told reporters on Monday that the Trump government had "very little" consulted the Democrats and predicted that it would be difficult to get the approval of the new pact if the Democrats took over the house.
"If there is a major change here, and I think there will be one, it will be very difficult to try to get this trade deal through," Levin said.
The seasoned legislator, a fierce critic of NAFTA, also said the new rules on regional content were less burdensome than they seemed.
At present, more than 2 million vehicles a year are manufactured and exported to the United States, including the BMW factory in South Carolina. Another concern is that if costs increase, companies will probably stop production in the United States and build cars for sale abroad in Asia or Eastern Europe.
Ford and GM have welcomed the deal, but automakers continue to assess its impact on their business models. It is unclear whether incentives to increase production in the United States will outweigh the costs of additional regulation and rising prices for materials, some executives said.
"That's the big question," said John Bozzella, president of Global Automakers, a professional group. "We just do not know at this point."
Erica Werner contributed to this report.
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