Revisit The “America First” and Protectionism: Evidence from The USMCA Renegotiation

Chaofan CHEN, Frank

Introduction

Since Donald Trump’s presidency, his “Make America Great Again” (MAGA) doctrine has dominated the United States – a country that once labelled itself as open, accessible, and globalised. A dig-into understanding of the MAGA idea can reveal the underlying principle of “America First” and the shadow of protectionism, which are jarring in the present tightly interconnected world.

To better understand the de-globalisation and de-multilateralism practices under Trump’s administration, we can examine the renegotiation of the North American Free Trade Agreement (NAFTA) – USMCA. NAFTA was a flagship of the multilateralist and free trade ideas of the WTO-centred international trade landscape, one that shared opportunities with neighbouring countries of Mexico and Canada. However, Former President Trump referred to this agreement that promotes international free trade as harmful to his nation (Faux, 2017).

The persistence of unilateralism, or like ideas, in US trade and foreign policy, including under the Biden-Harris administration, has received significant attention from society. Such doctrines have been dubbed “Trumpism”. Trumpism can be characterised by a highly emotive, right-wing, populist sentiment that is extremely anti-liberal. These ideas drive Trumpism advocates – the blue-collar workers adversely affected by globalisation and seeking to reclaim their former economic security. Conversely, these ideas have provided the necessary popular legitimacy for President Trump’s policies and practices.

This article will begin by exploring the ideas of “America First” and defining protectionism. It will then delve into the renegotiation of NAFTA and the creation of USMCA. Finally, this article will discuss if USMCA is a better free trade agreement than NAFTA and conclude with an overview of the findings. By examining these issues, we can gain insight into the current state of the US’s trade and foreign policies and how it affects globalisation and regional integration.

The idea of America First

The discussion of the “America First” concept can be traced back to the period of two World Wars and its intersection. Then established hegemons, such as the United Kingdom, were unable to maintain global order or enforce rules due to their weakened national competence brought by the world war. At the chaotic moment, the US chose to abandon involving international interaction but generated the idea of “America First.” The “America First” idea was during then-US President Woodrow Wilson’s presidential campaign in 1916 when he first formulated this political term to underscore America’s neutral position in WWI (Rubino, 2017). To look in-depth, we can find that the “America First” ideology is rooted in American exceptionalism and non-interventionism (Olson, 2013).

French political scientist Alexis de Tocqueville first coined the US exceptionalism through his comparative studies of the United Kingdom, France, and the United States, he found that the United States was exceptional and unique in historical developing trajectories. And this idea was accepted by some similar-minded scholars and has been developed. Lipset (1997) explained American exceptionalism from the founding principles of liberty, egalitarianism, individualism, republicanism, democracy, and laissez-faire economics, all of which were considered novel compared to other existing countries or systems. For the United States non-interventionism policy, it was the US’s foreign doctrine between the late-18th century and the early 20th century, which underlined principles of this doctrine were non-alliance and non-engagement in any confrontations that did not threaten US territory. This period in US history is often referred to as the “isolationist” era.

When it comes to Trump’s era since 2016, the “America First” idea was embodied in the “Make America Great Again” (MAGA) political slogan. Trump and his administration started to review many policies of the previous administrations on international trade and so on fields and made the US quit from many multilateral international organisations and treaties and they defended as protection to the United States. Several trade conflicts marked the changes of the United States from a defender of a liberal trade world to a unilateral “MAGA” orientation. One is the trade war with the People’s Republic of China, it was a very comprehensive trade confrontation with China by executing discriminating tariffs, and sanctions on key manufacturing sectors, and discoursing hostile diplomatic discourse with China. Another one is the renegotiation of NAFTA, which we proposed with Trump’s belief that this is harmful to the US. The new agreement of NAFTA, the USMCA, has strengthened the advantages of the US in this trilateral trade relationship in many ways. We will detailedly discuss this in the later part. These issues have alarmed the world that protectionism and “America First” USA is returning.

Revisit Protectionism

Protectionism is a professional word used in political sciences and international trade. This word indicates the national actions to help its own trade or industry to be superb from others by taxing goods from other countries or bringing other non-tariff barriers, like discriminative sanctions.

Reasons or incentives for countries to adopt protectionist policies are multi-dimensional. It could be the constraint from domestic politics (Abboushi, 2010), and especially the party competition and interest of the specific interest groups behind certain political power. Normally it could be hegemon transnational companies or agricultural groups.

Under the belief that protectionism could benefit the nation, does it subsequentially help the state? Research conducted by Abboushi (2010) shows that the answer is no, and in contrast, protectionism hurts public welfare even though those interest groups are protected and beneficial.

Another interesting angle to reflect on protectionism is from its opposite, which is the free trade system. The common practice of current free trade is to sign a bi- or tri- or multi-lateral free trade agreement given that signing a regional or global FTA is extremely difficult. Wandel (2019) discusses whether the FTA can promote free trade, he believes FTA takes sneaky protectionism for twofold reasons. First of all, the interests of special groups who support the FTA might be unfairly beneficial. Second, FTA abandons regional trade but turns to a smaller group of countries which might be controversial to liberal ideas. Therefore, the free trade belief has been challenged by multiple aspects.

A “New” NAFTA: The United States-Mexico-Canada Free Trade Agreement

Old and New of the Free Trade Agreement

The North American Free Trade Agreement (NAFTA) was a comprehensive free trade agreement signed in 1994 among countries of Canada, the United States and Mexico. The GDP sum of these three countries is over 26 trillion USD, and the populations are over 500 million. NAFTA’s replacement is named the United States–Mexico–Canada Agreement (USMCA), which was signed in 2018.

To find out what are the new things and differences between NAFTA and the new USMCA, Lobosco, Fung and Luhby (2019) conducted research and found six key changes.  First is on auto manufacturing, the new USMCA has required 75% of the car parts should be made in three states, which previously was 62.5%. USMCA also requires more car parts should be made by workers who can earn at least 16 USD per hour, which is a high salary standard and beneficial to the US (Mexico is advantaged by its cheap labour and can be hurt by such requirement). Trump administration also claimed 76,000 new jobs were created thanks to this regulation. For labour rights, the USMCA strengthen overseeing labour rights protection, especially for Mexico labours. The new agreement allows inspections of factories and facilities.

Another industry policies have changed in UNMCA is the dairy industry, which allows US dairy products to enter the Canadian market, and benefit US farmers. Due to the latest development in technologies, USMCA also updates rules on technical firm management. USMCA waives the requirements that US tech firms should store data in their respective three countries and provides privileges to them from being sued because of the content of US tech platforms. USMCA also emphasises the protection of the environment, it provides 600 million in funds to solve environmental pollution in three countries. And the last difference is that the US asked for at least 10 years of biological exclusivity to protect US firms and more control over drug management. Overall, we can see many changes are pro-US interests.

Incentives for the US to Renegotiate NAFTA

Reasons, why the United States wants to re-negotiate NAFTA, can be divided into two aspects: the needs of domestic politics and the extended effects on international trade and relations.

For the domestic political force, it can be summarised as the fulfilment of the electoral promise made by President Trump. During the presidential campaign in 2015-2016, Trump “vowed to force Canada and Mexico to renegotiate the NAFTA trade agreement with the United States if elected, as part of an effort to protect and restore American jobs (Stephenson and Becker, 2016).” Therefore, Trump fulfilled his promise by proposing the renegotiation of NAFTA.

Another aspect of domestic forces is the thriving populism among US societies. Robert and Helbt (2021) found that Trump’s criticism of NAFTA correspondent to the US’s populist ideology. They also found that people who are involved in the USMCA like dairy farmers, and car and steel workers are some of the unwavering supporters of Trump – the blue-collar labours. Such populist ideas have influenced the policymaking of the United States by challenging the WTO-pillar principle, multilateralism and non-discrimination, with re-negotiating bi- or tri-lateral FTA. It also undermines international trade stability and causes higher costs in international trading.

Domestic politics also has a great influence on the foreign and trade policies of a nation, populism of the domestic society has given Trump reasons to promote unilateralism and nationalism in international arenas. Renegotiation of NAFTA is just one of the critical points of the US’s de-globalisation process, combined with withdrawing from the Trans-Pacific Partnership (TPP), another FTA, and the Paris Agreement. The international trade deficit is another perspective to explain the incentives. Due to the differences in industry structure, the US has great deficits in trading with other countries, including its neighbouring countries. Therefore, such internal and external forces have incentivised the US government to renegotiate NAFTA.

Discussion and Conclusion

The above analysis scrutinises the renegotiation of NAFTA and its result – USMCA, elucidating the theories and concepts underlying these changes and progress. A contentious issue surrounding the USMCA is whether it can be considered a better Free Trade Agreement than NAFTA. Notably, Wandel (2019) suggests that this may not be the case due to the lower level of liberalisation in the USMCA compared to NAFTA. When benchmarking the USMCA with the five key principles of the World Trade Organization (WTO), it becomes apparent that compliance with these standards cannot be ideally met with the new USMCA and the old NAFTA. The new car parts salary requirement in the new USMCA cannot be regarded as favourable for Mexico, pluses the unilateral re-negotiation proposal raised by the United States and the significant influence of its domestic politics on the FTA to create an environment where fair competition cannot be ensured.

In 2020, the Biden administration succeeded the Trump administration. Although the two presidents differ in their political ideologies and party affiliations, the policy orientation has yet to be significantly differentiated. Some critics have labelled Biden’s international trade and foreign policy policies as “softened Trumpism,” implying that the underlying “America First” idea has not been entirely discarded. This development raises concerns among many states, including US allies. To remind the world of the pitfalls of isolationism and the failure to accept hegemonic responsibility, some scholars have reignited the discussion of the Kindleberger Trap in the present context.

To conclude, this article examines the replacement of NAFTA with the USMCA. The renegotiation was primarily motivated by domestic factors such as election promises and the rise of domestic populism in the United States. The article finds that the new agreement provides more benefits to the United States, particularly labourers, farmers, firms, and state actors, leveraging the country’s strong national strengths and bargaining power. However, the renegotiation of NAFTA reflects a shift away from previous US commitments to multilateralism and liberalism in favour of a stronger focus on its domestic interests, epitomised by the “America First” policy doctrine.

This article has also discussed the re-popularisation of Protectionism, “America First”, US exceptionalism, and US non-interventionism in US society. Such review and analysis have provided us with theoretical and historical explanations for this social phenomenon and state actions. These developments remind the world that the United States may no longer be as generous and will likely prioritise its domestic agenda. And we need to be cautious about the drawback of US isolationism and the danger of falling into the Kindleberger Trap.

Reference

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Emily Stephenson & Amanda Becker 2016, June 28,-last update, Trump vows to reopen, or toss, NAFTA pact with Canada and Mexico. Available: https://www.reuters.com/article/us-usa-election/trump-vows-to-reopen-or-toss-nafta-pact-with-canada-and-mexico-idUSKCN0ZE0Z0.

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This is a course paper for POLS 3313: Governance and Society in North America, the instructor is Dr. Selçuk Çolakoğlu.