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NAFTA 2.0: Free Trade or Central Planning?
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Last week the United States, Mexico, and Canada agreed to replace the North American Free Trade Agreement (NAFTA) with a new United States-Mexico-Canada Agreement (USMCA). Sadly, instead of replacing NAFTA’s managed trade with true free trade, the new USMCA expands government’s control over trade.

For example, under the USMCA’s “rules of origin,” at least 75 percent of a car’s parts must be from the US, Canada, or Mexico in order to avoid tariffs. This is protectionism designed to raise prices of cars using materials from outside North America.

The USMCA also requires that 40 to 45 percent of an automobile’s content be made by workers earning at least 16 dollars per hour. Like all government-set wages, this requirement will increase prices and decrease employment.

The USMCA also requires Mexico to pass legislation recognizing the “right of collective bargaining.” In other words, this so-called free trade agreement forces Mexico to import US-style compulsory unionism. If the Mexican legislature does not comply, the US and Canada will impose tariffs on Mexican goods.

The USMCA also requires the three countries to abide by the International Labour Organization (ILO) standards for worker rights. So, if, for example, the bureaucrats at the ILO declared that Right to Work laws violate “international labor standards”’ because they weaken collective bargaining and give Right to Work states an unfair advantage over compulsory unionism states and countries, the federal government may have to nullify all state Right to Work laws.

The USMCA also obligates the three countries to work together to improve air quality. This sounds harmless but could be used as a backdoor way to impose costly new regulations and taxes, such as a cap-and-trade scheme, on America.

This agreement also forbids the use of currency devaluation as a means of attempting to gain a competitive advantage in international trade. Enforcement of this provision will be difficult if not impossible, as no central bank will ever admit it is devaluing currency to obtain a competitive advantage in international trade. Of course, given that the very act of creating money lowers its value, the only way to stop central banks from devaluing currency is to put them out of business. Sadly, I don’t think the drafters of the USMCA seek to restore free-market money.

The currency provision will likely be used to justify coordination of monetary policy between the Federal Reserve and the Mexican and Canadian central banks. This will lead to region-wide inflation and a global currency war as the US pressures Mexico and Canada to help the Fed counter other countries’ alleged currency manipulation and challenges to the dollar’s reserve currency status.

A true free trade deal would simply reduce or eliminate tariffs and other trade barriers. It would not dictate wages and labor standards, or require inter-governmental cooperation on environmental standards and monetary policy. A true free trade deal also would not, as the USMCA does, list acceptable names for types of cheeses.

Those of us who support real free trade must not let supporters of the USMCA get away with claiming the USMCA has anything to do with free trade. We must also fight the forces of protectionism that are threatening to start a destructive trade war. Also, we must work to stop the government from trying to control our economic activities through regulations, taxes, and (most importantly) control of the currency through central banking and legal tender laws.

(Republished from The Ron Paul Institute by permission of author or representative)
• Category: Economics, Ideology • Tags: Free Trade 
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  1. MarkinLA says:

    More fairy tale “real free trade is the way” nonsense from libertarian Ron Paul. There has never been and never will be “real” free trade so why keep beating this dead horse? Every system devised by man is also corrupted by him for the benefit of somebody.

    That is the real issue. If the system will always be corrupted, I say let it be corrupted for the benefit of the people of the US. If that means screwing the people of China or Mexico – so be it.

  2. CalDre says:

    A true free trade deal would simply reduce or eliminate tariffs and other trade barriers.

    A free trade deal would allow anyone to be a doctor and not grant monopoly rights to private property, which is against freedom and liberty.

    Ron Paul, as always, is a ((Mises)) extremist. He doesn’t give a fuck about anybody but his “principles”, which just happen to favor everyone but those with “property” being dirt poor and having no liberty at all.

    I’ve always appreciated Ron’s anti-war and small government views but his “free trade”, “private property”, “fuck the worker” ((Mises)) views are just repulsive.

  3. Patricus says:

    Ron Paul was the least objectionable candidate when he ran for president but he is delusional on the trade issue. Nations are not going to dissolve any time soon. They will always advance the interests of their own citizens, assuming citizens have some input. International free trade would require a powerful one world government to enforce the universal trade rules. The international masters would want their cut. Libertarianism and totalitarianism are identical.

  4. Franz says:

    Those of us who support real free trade

    …were protectionist to begin with.

    Everybody knows NAFTA was managed, protectionist trade. Ye gods, it started off as a 2,000 page laundry list 0f corporate demands. It never got better.

    There is not now and never can be Free Trade, and a nation that does not protect the markets and industries within its own borders will keep neither, and in due course will cease to be a “nation” at all, as is happening with us now.

    Why does Ron Paul think Marx endorsed Free Trade… as a weapon? Because it works.

    I burned my Libertarian Party card years ago when I discovered the individual and group liberty I was concerned with was not even on their scorecard. It’s about corporate welfare, period.

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