President Donald Trump yesterday delivered on yet another campaign promise.
He announced the demise of the very awful North American Free Trade Agreement (NAFTA). In the alternative, we now have what he is calling “The United States-Mexico Trade Agreement.”
Trump correctly prefers bilateral to multilateral deals. Because every additional partner beyond one – dilutes the U.S.’s enormous inherent economy-size advantage.
NAFTA had two partners – Mexico and Canada. And that one-too-many – contributed to NAFTA’s mighty awfulness.
With Trump’s bilateral Mexico deal – Canada is now on the outside looking in. And they’ll most assuredly come rushing back to the bargaining table. (Anyone want to bet me large coin they won’t?)
It is fantastic to drastically improve our trade relationship with Mexico. It is fantastic to set the table to do so with Canada. It is fantastic to have accomplished same with the European Union.
But Trump ain’t nowhere near done. Trump is playing 3-D chess – against multiple opponents. And the ultimate adversary – is China. All of these deals – are setting up negotiations with the Communist Middle Kingdom.
And a crucial component of China trade negotiations – is Intellectual Property (IP).
China steals tons of it. And forces companies to “voluntarily” give up tons more to gain access to China’s market.
The Mexico trade deal – greatly improves all aspects of IP protection. IP protections are, in fact, the lead items on the U.S. Trade Representative (USTR) Fact Sheet:
“Intellectual Property: The United States and Mexico have reached an agreement on a modernized, high-standard Intellectual Property (IP) chapter that provides strong and effective protection and enforcement of IP rights critical to driving innovation, creating economic growth, and supporting American jobs.
“Key Achievement: Most Comprehensive Enforcement Provisions of Any Trade Agreement.
“Key Achievement: Strongest Standards for Trade Secrets of Any United States FTA.
“Key Highlights: Protections for Innovators.
“Digital Trade: The new Digital Trade chapter contains the strongest disciplines on digital trade of any international agreement, providing a firm foundation for the expansion of trade and investment in the innovative products and services where the United States has a competitive advantage.”
And why do we think all aspects of IP protection are the lead items on the USTR Fact Sheet?
Because we want to make sure now-left-out-post-NAFTA Canada sees them.
“‘(S)ignificant concerns include poor border and law enforcement with respect to counterfeit or pirated goods, weak patent and pricing environment for innovative pharmaceuticals, deficient copyright protection, and inadequate transparency and due process regarding geographical indications.’
“In other words, Canada is not letting our customs officials stop pirated and counterfeit goods that flow through Canada into the United States. Nor are the Canadians enforcing the laws themselves — they conducted exactly zero criminal prosecutions for counterfeiting in 2017.”
And – because we want to make absolutely sure China sees them.
“That’s ‘not necessarily positive’ for China, (John Woods, chief investment officer for Asia Pacific at Credit Suisse) told CNBC’s ‘Squawk Box’ on Tuesday.
“He explained that based on the latest trade talks between the two largest economies in the world, the U.S. now wants China to commit to structural reforms rather than simply reducing the imbalances between the two countries.”
“Structural reforms” – like China not having IP theft as industrial policy.
“Structural reforms” – like China not having IP-handover-mandates as prerequisites to entry to China’s market.
The European Union? Checkmate.
What does the barber say? “Next.”
Meanwhile, We the People of the United States of America – are oh-so-much-better-off for all of it.