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The new U.S.-Mexico-Canada deal offers modest changes. Will it help the economy?

President Trump made renegotiating NAFTA a priority of his administration. What's really in the new United States-Mexico-Canada Agreement and what does it mean for the U.S. economy? Amna Nawaz learns more from Edward Alden of the Council on Foreign Relations.

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  • Amna Nawaz:

    And now back to our lead story, the new trade pact between the U.S. Canada and Mexico.

    To help us better understand what's in the deal and its potential effects for the U.S. economy, we're joined by Edward Alden, senior fellow at the Council on Foreign Relations, where he specializes in the U.S. economic competitiveness and trade. He's also author of "Failure to Adjust. How Americans Got Left Behind in the Global Economy."

    Welcome to the "NewsHour."

  • Edward Alden:

    Great to be with you, Amna.

  • Amna Nawaz:

    So, let me just start off with this understanding.

    Obviously, the president has a priority of rewriting big trade deals. He came in with that mission. Big picture, how is this new deal different from the old one?

  • Edward Alden:

    Well, it's probably not radically different from the old deal.

    I mean, the best news is, it's still in place. We have still got this North American supply chain from the U.S. and Canada and Mexico still intact. There are some changes that I think are significant, particularly the rules about how cars have to be made.

    There's some additional opening. If you try to sell milk into Canada, the deal is a little bit better. There are provisions to try to keep countries from devaluing their currencies to gain competitive advantage. There are some important tweaks. And I think the president has some right to trumpet what he's done. But it's not a wholesale change from NAFTA as it exists.

    There are really modest changes on the whole.

  • Amna Nawaz:

    So I want to go into some of those specifics in a moment. But just again, we heard the president, you mentioned, hailing this.

    He tweeted about it this morning. And he wrote that this is a great deal for all three countries, that it solves the many deficiencies and mistakes of NAFTA, greatly opens markets to our farmers and manufacturers, reduces trade barriers to the — he says will bring our three great nations together.

    On this fixing part specifically, what do you think this deal fixed that needed fixing?

  • Edward Alden:

    Yes, you knew, whatever Trump came back with, he was going to say it was the greatest deal ever negotiated.

    But to sort of zero in, I think the biggest thing that has needed fixing is the stubbornly low wages in Mexico. When NAFTA was negotiated, when Bill Clinton got it through the Congress, the promise was, look, this is going to raise Mexican living standards, their wages are going to go up, they're going to buy more American goods.

    By and large, that didn't happen. Wages in Mexico are actually lower relative to U.S. wages now than they were two decades ago. So what they have tried to do in this deal was sort of force wages up by fiat, saying more of the content in cars has to be made by high-wage workers. Mexican labor standards have to be tougher in order to allow unions to organize, some effort to really go after a problem that, interestingly, Democrats and the labor left have been complaining about for years.

    They have been Trump's real audience in this renegotiation. He's kind of trying to bring organized labor on board, which is sort of ironic for a Republican president.

  • Amna Nawaz:

    Those specific changes in the auto industry, though, do those help the U.S. too? Does that mean higher wages or more jobs or different car prices?

  • Edward Alden:

    That's — he's promising that it will create more jobs and higher wages in the United States. We will have to see.

    I mean, the auto industry is complicated. It could play out in a lot of different ways. If it does lead to higher wages, it'll probably knock up car prices a little bit, but the effects will be fairly small. So we don't really know. But that's the promise that the president's made, that this is going to bring jobs back to United States in the auto industry, and it's going to lift wages for auto workers.

  • Amna Nawaz:

    You mentioned dairy farmers, the movement of milk from the United States to Canada.

  • Edward Alden:

    Yes. Yes.

  • Amna Nawaz:

    This will open up that market, right, greater access to the Canadian market. What kind of impact is that going to have here?

  • Edward Alden:

    I mean, it'll help in places like Wisconsin and Vermont, where they have complained a long time that they can't sell their milk products into Canada.

    It's pretty small. Canada has a very protected dairy sector, and the industry's politically powerful, particularly in Quebec. Quebec is having a provincial election today. Prime Minister Trudeau in Canada needs support from Quebec to be reelected when he has to go to the polls next year. But it's a bigger opening than the Canadians have never — have ever made before.

    And the president promised in this negotiation he was going to do something about it, and he has.

  • Amna Nawaz:

    So the president's been hailing these big wins, right? What do you see when you look at the overall deal that the U.S. had to give up to negotiate some of those wins?

  • Edward Alden:

    Well, I mean, one of the interesting things is, it didn't actually have to give up a lot. It made a bunch of concessions from the president's opening positions.

    I mean, he had called for a much more radical rewriting of the auto rules. He wanted a sunset clause, where the deal would automatically have to be renegotiated every five years. There were a bunch of things that the administration backed away from, but Canada and Mexico, by and large, didn't get a whole lot of new things they wanted in the agreement.

    What they got is, the agreement survives, and their access to the huge U.S. market remains intact. That's what they wanted at the end of the day.

  • Amna Nawaz:

    I got to ask you about the way in which this deal came through too. It was a long negotiation, about a little over a year. It got really tough in terms of the public talk sometimes.

    What does that say about setting precedent for future deals and other countries?

  • Edward Alden:

    I mean, I think this is the bigger problem here. Trade negotiations have for decades now been conducted in a fairly collegial way. That doesn't mean that were not hard tradeoffs.

    But countries tried to create a win-win. The president went into this one and create a win-lose. This deal was going to be better for the United States, and worse for Canada and Mexico. That cannot be a good thing long-term for our relations with those countries. And it sends a tough message to the rest of the world, particularly China, where the United States faces a series of big trade problems and negotiations really haven't started in earnest yet.

  • Amna Nawaz:

    Very quickly, less than 30 seconds.

    Now, is there a way to look at this and say, OK, the U.S. is better off with this new deal than it was with the old one?

  • Edward Alden:

    With these things, I don't think we're going to know for some years. I think there's some possibility, I think, of rebuilding some support across party lines. Democrats and Republicans have been so divided on this. There's some things here the Democrats will like.

    But we're at the very early stages of what I think is going to be a long process of trying to shift U.S. trade relations with the world.

  • Amna Nawaz:

    Still too early to see then. We will follow it.

    Edward Alden, thanks for being here.

  • Edward Alden:

    Good to be with you. Thanks, Amna.

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