The Trump administration has been bragging about how the New NAFTA, officially called the United States Canada Mexico Agreement or USCMA, will bring more jobs to the United States. The New NAFTA does raise the North American content for car parts rule and requires 40% of the labor in making the cars be paid $16 an hour, which is well above the wages paid to Mexican auto workers. But cars that don’t meet these new standards will only have to pay a 2.5% tariff, which is what all cars coming from Europe, Japan and South Korea already pay.

But even if the New NAFTA does boost auto manufacturing in the United States, it likely won’t help U.S. auto workers. Just look at what happened following the Trump administration’s tariffs on steel. U.S. steel prices rose 33%, U.S. steel companies’ profits soared, and U.S. steel workers got…nothing. In fact, the unionized steel workers at ArcelorMittel, the world’s biggest steel producer have authorized a strike against the company’s proposed contracts that would increase the cost of health care for its workers.

Less talked about, but important, are other changes made to the old NAFTA. Two changes refer to so-called “intellectual property” or the ability of corporations to make even more profits off of new ideas. The New NAFTA extends copyrights from 50 to 70 years beyond the death of the author. It also extends the patent period for new drugs to ten years, which will raise drug prices in Canada, where prices are often half that of the United States.

The New NAFTA also makes it harder for Canada and Mexico to restrict the use of GMOs (genetically modified organism) produced by large agribusinesses like Monsanto. The New NAFTA also paves the way for the use of new synthetic or man-made pesticides. Many of these synthetic pesticides have ended up being banned because of their effects on both animals and human beings, the most famous of which was DDT.

The New NAFTA is also an attempt to bind the Mexican and Canadian economies closer to the United States. One the changes is meant to prevent either country from signing a free trade agreement with China.

The Trump administration used a major threat of putting 25% tariffs on cars made in Mexico and Canada to extract some concessions for U.S. dairy farmers from Canada in the New NAFTA and then declared a great victory. Trump hopes to use the same method on the European Union and China. But both are much larger economies than either Canada or Mexico and are much less entwined with the U.S. economy. Both the EU and China have said that they are not going to be bullied by the Trump administration and retaliated to earlier Trump tariffs on European steel and aluminum and tariffs on almost half the goods that China exports to the United States.

The New NAFTA is good for big corporations, and bad for workers in U.S., Canada, and Mexico. It should be opposed and rejected.

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This is part two of a three-part interview. Click for part one and part three of this interview. Fight Back!: In your opinion, what are the main causes of the U.S. trade deficit?

Masao Suzuki: Well, let start with some of the views that are out there. The Trump administration claims that the U.S. is “being taken advantage of” by other countries. But to me, this is just promoting resentment and a victim mentality, when of course the reality is that the U.S. is still the world’s largest economy and military power. The international trade agreements such as the WTO [World Trade Organization] and NAFTA were set up largely by U.S. initiative.

Another view gaining popularity is the so-called “twin deficits” theory. This view holds that the growing U.S. federal government budget deficit, which is large and getting larger with Trump’s tax cuts, means that the U.S. government has to borrow more and more. If the U.S. is not saving enough to feed this borrowing, then it has to borrow from abroad. But where is the rest of the world going to get the dollars to buy U.S. government bonds? By selling more to the U.S. than they buy from the U.S., that is the U.S. trade deficit.

This view is backed by the big increases in both the U.S. government deficits and the U.S. trade deficit in the 1980s under Reagan, and again today under Trump. But a problem with this view is in the 1990s, then-President Clinton and the Democrats in Congress raised taxes and managed to balance the federal government budget. In fact, they managed to bring the budget to a surplus where tax revenues were greater than spending. But the broadest measure of trade, the current account that I spoke of in the first interview, saw the deficit triple in size under Clinton.

Fight Back!: So what do you think?

Suzuki: I think that there are two important factors. One is the state of the U.S. economy. When the economy is booming, as it is today, there are more jobs and income. People buy more, which includes imports, which tend to rise during an economic expansion. As imports rise, so does the trade deficit. The opposite happens during a recession – when the U.S. economy goes into reverse, jobs, incomes and imports all fall, as well as the trade deficit. Look at what happened in 2008 and 2009. In the last months of 2008, the U.S. financial crisis made what was up to then a mild recession into the biggest economic decline since the Great Depression of the 1930s. The U.S. trade deficit went from $695 billion in 2008 to $380 billion in 2009 – a drop of 45% in only one year! Then as the economy came back, so did the trade deficit.

Another thing that is not mentioned much in the mainstream media is the role of U.S., European, Japanese and other multinational corporations. These companies have been offshoring production for years in search of lower costs and greater profits. The single largest type of goods imported to the U.S. from China is cell phones. But these are not cell phones made by Chinese companies such as Huawei, but rather by corporations of other countries, including Apple of the U.S.. The U.S. now imports most of its cars – not including pick-up trucks and SUVs – many from Mexico and Canada. But these are not Mexican or Canadian car companies, rather they are U.S., Japanese and German companies that have set up shop in Mexico or Canada to produce for the U.S. market.

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Trump fired the opening shot by announcing U.S. tariffs on steel and aluminum on March 8. China replied by announcing tariffs on $3 billion of U.S. goods on April 1. This action was relatively modest as China only provides about 2% of steel imported to the U.S. The next day, Trump escalated the trade fight again by announcing tariffs would be placed on another $50 billion of imports from China. The Trump administration targeted industries that the Chinese government is prioritizing in their modernization effort known as “Made in China 2025.”

China replied on April 4 by announcing its own tariffs on U.S. goods worth about $50 billion. These tariffs targeted U.S. aircraft and soybeans, arousing protests from the farm belt which largely voted for Trump. China’s tariffs did not include large U.S. aircraft and U.S. services, which will allow China to respond to any more escalation by the Trump administration. Calling this tit-for-tat unfair, Trump called for tariffs on another $100 billion of Chinese goods, which China vowed to respond to.

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