STEVE INSKEEP, HOST:
Today is the deadline set by the Trump administration to send Congress a new North American trade deal. Mexico is in. Today, we find out if Canada is in or out. The administration negotiated some updates to NAFTA, the North American Free Trade Agreement from the '90s. So how much sense does the new deal make? Austan Goolsbee was chairman of President Obama's Council of Economic Advisers, and he's on the line. Welcome back to the program.
AUSTAN GOOLSBEE: Hi, Steve. Thanks for having me.
INSKEEP: Glad you're with us. And I want to play you some sound of Peter Navarro. He's a presidential economic adviser. He was on the program the other day. And he pointed out that this deal with Mexico - the part we know about, anyway - would assure more North American parts in cars that are assembled in multiple countries, digital trade provisions, a lot more. Let's listen.
(SOUNDBITE OF ARCHIVED BROADCAST)
PETER NAVARRO: This is a 25-year-old agreement, so it needed things like protections for digital trade, e-commerce, things like that, so that's in there. For me, Steve, the guts of this really is the rules of origin requirements, which go up to 75 percent.
INSKEEP: That's the percentage of a car that has to be made in North America to qualify for free trade across borders. What's wrong with that?
GOOLSBEE: Oh, I don't think there's much wrong with the - updating the digital goods treatment. There's a couple of things on environmental that they agreed on, many of which it looked like they kind of just took from the Trans-Pacific Partnership, which the president pulled the U.S. out of, but was an agreement that both Canada and Mexico signed onto. So there was a natural kind of a portfolio of things that they could choose to update NAFTA with.
I guess my overriding impression is relief. This is all they - this was the only reason we were about to declare a trade war with our two biggest export markets and allies? These are small - it's pretty insignificant things. And I don't know if it's like, you know, you're going to do as I say or I'm going to smash every window in this house and break down the door. Fine; we can get the 2 percent milk. You know...
INSKEEP: (Laughter).
GOOLSBEE: We don't have to get 1 percent.
INSKEEP: OK, so wait a minute. There's a couple things to follow up on there. First, you're saying that these are provisions that were similar to what was in the Trans-Pacific Partnership, which included not only Canada and Mexico, but a bunch of other nations facing the Pacific. Is this deal actually a worse deal than the TPP, which the president dumped?
GOOLSBEE: Oh, for sure, a hundred percent worse. The thing is that the TPP - there were provisions that people argued about, but nobody can argue with the fact that it cut tariffs on 18,000 different products, industries across the gamut of the U.S. And what we're talking about to modify NAFTA is really almost entirely about just one sector and just one minor adjustment. So I don't think there's anything especially wrong with this. It's just hard to understand what - if this were sufficient, how was the TPP not something - why did the president say that was the worst negotiated deal in history or whatever he said if you were willing to settle for what Mexico has said here? I think anything that prevents us from having a trade war is good. Every day without a trade war is a good day for America.
INSKEEP: Is it possible the president wants to make a lot of noise about trade but doesn't actually want to change that much - which in some ways would be disturbing, but also might be reassuring? This is actually not that big a change.
GOOLSBEE: Yeah, maybe. This certainly follows on the heels of - if you remember some months ago, the president announced that they were renegotiating the Korea Free Trade Agreement. And they announced a couple of minor tweaks, which people at the time said, well, that's - doesn't seem that big, and they said, and is Congress going to pass that? And we kind of never heard from it again. And it served mostly as a way to get us off of the impending trade war with our ally. If that's what's happening in North America, then it's fine. We should say, hey, good job, Mr. President. You got us an adjustment of a small part of one sector within NAFTA and updated a couple things, and it's great.
If this is a sign, however, that the United States is going to kind of systematically threaten a massive escalation of trade war, it's taking a risk that I think maybe - it's taking a big risk and maybe not taking into account the damage that would occur if something went wrong.
INSKEEP: In a sentence or so, if Canada - if you feel that this is a really rather minor adjustment to NAFTA, is - should Canada just go along with it, say, yeah, sure, fine?
GOOLSBEE: I think Canada - if - look; I'm not - there are many people far more expert about what the Canadian perspective is, but I think they would look at what Mexico agreed to. I don't think it would be that hard for them to say, yeah, that seems fine.
INSKEEP: I got to stop you there. We're out of time.
GOOLSBEE: Yeah.
INSKEEP: But I'll be happy to continue this discussion another time. I'm sure other people will as well. Austan Goolsbee chaired President Obama's Council of Economic Advisers. He's now at the University of Chicago. Thanks.
GOOLSBEE: Thanks, Steve. Transcript provided by NPR, Copyright NPR.
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