President Trump speaks at the White House signing ceremony for the USMCA, Jan. 29.
Photo: Alex Brandon/Associated PressThe U.S.-Mexico-Canada trade agreement took effect last week, and U.S. business and political leaders should be racing to take advantage of its benefits. The deal will hasten economic recovery from the Covid-19 pandemic. Even more important, it will counteract the Chinese Communist Party’s aggression.
The reduction of trade barriers among the USMCA’s parties will strengthen U.S., Mexican and Canadian supply chains, returning manufacturing jobs to North America from China. Even before the Covid-19 pandemic exposed how North America had become too dependent on China for medical equipment and drugs, Beijing’s campaign of intimidation and censorship was already hurting international companies.
The pressure China inflicted on the National Basketball Association last year after Houston Rockets General Manager Daryl Morey voiced support for Hong Kong protesters is one of countless Communist Party demands that companies abandon liberal values, forgo criticism, and provide at least tacit support for the repression of the Chinese people. Implementing the USMCA provides an opportunity to minimize North American companies’ exposure to the party’s coercive power.
The U.S., Mexico and Canada must undertake the economic recovery together. Economists predict a post-Covid-19 economic recession of about 6% to 8% of gross domestic product for the U.S. and Canada. Mexico’s recession is projected to be even deeper, between 8% and 10% of GDP, due in part to a weak economic stimulus package. If the Mexican economy, which relies heavily on currently distressed sectors like tourism, manufacturing and oil, lags behind the U.S. and Canada, consumers and workers in all three countries will suffer.
In Michigan alone, the sudden rupture of deeply interconnected supply chains in automobiles helped lead to the loss of more than a million jobs in less than two months. Exports from Michigan to Mexico amount to more than $10 billion a year. In contrast to trade with China, this trade with Mexico is characterized by much greater shared production. The percentage of American content in most Mexican exports to the U.S. is between 20% and 40%, while U.S. content in imports from China is approximately 4%.
A joint North American recovery will require diplomatic as well as economic therapies. U.S. and Canadian diplomats must convince the administration of Mexican President Andrés Manuel López Obrador that the expansion of North American trade is essential. Even before the pandemic, Mr. López Obrador’s populist policies and distrust of corporations were depressing Mexico’s economy.
More than 40% of Mexicans live in poverty, yet the Mexican government announced abrupt cancellations of potentially lucrative projects, most notably a partially built Mexico City airport in 2018. In addition to lost jobs, government disruptions of that sort depress investor confidence.
After the virus struck, Mr. López Obrador’s odd mix of fiscal restraint and distrust of business led him to pursue a policy of austerity rather than fiscal stimulus. In June Mexico fell off consulting firm AT Kearney’s list of the top 25 destinations for foreign investment.
But as the economy worsens—another 8% of Mexicans may fall below the poverty line this year—leaders may be ready to try a new cure. An overwhelming majority of Mexicans consider economic hardship to be the greatest challenge facing the country. Treatment could take the form of a U.S.-sponsored fiscal recovery plan for Mexico, using existing credit quotas at international institutions such as the World Bank and International Monetary Fund, as well as increased capital financing from the Inter-American Development Bank. In particular, Mexico should take advantage of its access to the IMF’s flexible credit line, which allows countries with strong economic fundamentals and policy track records to obtain assistance before they face a full-blown crisis.
U.S., Canadian and Mexican officials should align guidance for economic reopening with the implementation of the USMCA’s new rules-of-origin provisions. That would accelerate the reactivation of value chains in critical industries.
Public and private leaders who are already working together to satisfy demand for Covid-related essential products should shift discussions to a long-term vision for adapting North American economies to the post-Covid world. High-level forums, such as the U.S.-Mexico CEO Dialogue hosted by the U.S. Chamber of Commerce, will help identify opportunities for investment and joint ventures.
One discussion topic should be how to build resilient supply chains that reduce the corporate and national-security risk from Chinese espionage and unfair trade practices. Local business-to-business relationships play an important role. North American business organizations can help drive the near-term reactivation of regional production hubs and identify long-term ventures to capitalize on the repatriation of production to the region. All should work together to speed USMCA’s implementation in key industries such as automobile and pharmaceutical manufacturing, aerospace and energy.
Improved economic cooperation between the U.S. and Mexico shouldn’t be difficult. The countries share deep social and cultural ties strengthened by more than two decades of growing economic integration. When President Trump hosts Mr. López Obrador at the White House this week, the two leaders should discuss implementing the USMCA in a way that will accelerate the economic recovery and alter critical supply chains, protecting trade from the whims of an increasingly aggressive Chinese Communist Party.
The people of North America, while recognizing that their democracies are works in progress, should be proud of their ability to demand reform, exercise their rights to freedom of expression, and live free under the rule of law rather than under fear of an authoritarian regime. Citizens should demand that their leaders uphold the principles of free trade, realize the gains associated with reciprocal market access, and ramp up an engine of production in our own hemisphere through the USMCA.
Lt. Gen. McMaster, a senior fellow at Stanford University’s Hoover Institution and a retired Army officer, served as White House national security adviser, 2017-18. Mr. Tortolero, a Fulbright Scholar, recently received a master’s in international policy from Stanford.
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
"trade" - Google News
July 07, 2020 at 06:07AM
https://ift.tt/2ZKbWuM
The North American Trade Dividend - The Wall Street Journal
"trade" - Google News
https://ift.tt/2VQiPtJ
Tidak ada komentar:
Posting Komentar