On the last day of the seventh round of NAFTA negotiations, President Trump offered to pause the global steel and aluminum tariffs, scheduled go into force this week, only if a “new & fair NAFTA agreement is signed.”
We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must..
— Donald J. Trump (@realDonaldTrump) March 5, 2018
…treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.
— Donald J. Trump (@realDonaldTrump) March 5, 2018
U.S. Commerce Secretary Wilbur Ross recommended the tariffs in February after a Section 232 investigation found that imports of steel and aluminum “threaten to impair the national security.”
The offer probably won’t lead to quick progress in NAFTA negotiations. In January, the U.S. imported 31 percent of its steel from Canada and Mexico, and only 2.5 percent from China: the country the 232-report identified as responsible for global excess capacity. Both Canada and Mexico threatened to retaliate before Monday’s announcement if they are hit by the global tariffs.
However, Trump’s tweet does highlight that NAFTA 2.0 negotiations have been going nowhere, especially on chapters that matter, like agriculture, and, more importantly, intellectual property.
The U.S. has played tough on trade negotiations before and won, especially when it comes to protecting goods and services crucial to America’s comparative advantage. In 1986, President Ronald Reagan threatened to pull out of Uruguay Round negotiations unless services and intellectual property were put on the agenda.
Back then, most Hollywood films didn’t recoup production costs due to piracy and the U.S. pharmaceutical and chemical industries lost billions in patent theft a year. Indeed, many countries didn’t have any laws protecting medicines or other research and development-intensive forms of intellectual property, or IP.
Thanks to Reagan’s demands, NAFTA and the Agreement on Trade-Related Aspects of Intellectual Property Rights were the first trade deals to protect IP, and products that were once questionable novelties like the Internet have become global needs responsible for enormous contributions to the economy. The Internet Association estimates that sector employs 3 million Americans, accounts for 6 percent of U.S. gross domestic product, and a $159 billion digital trade surplus.
It is imperative to U.S. competitiveness that property rights continue to extend to technological frontiers. Overwhelmingly, Americans agree the next era of pie expanding innovations that will shape job skills, economic growth, and healthcare cannot come about if the rules in new spaces are weak and poorly enforced.
The U.S. remains the world leader for protecting IP rights, according to the U.S. Chamber of Commerce’s International IP Index and Property Rights Alliance’s International Property Rights Index. Unfortunately, the gap between the U.S. and its trade partners remains considerable.
As the U.S. renegotiates NAFTA and the U.S.-Korea Free Trade Agreement, the EU has been finishing deals with Latin America, Mexico, Japan, and Canada. At the same time, China has been spearheading a mega 16-nation Asia deal known as the Regional Comprehensive Economic Partnership. Neither of these promise to strengthen or normalize ownership rights of innovators.
In fact, once the U.S. pulled out of the Trans-Pacific Partnership, the remaining parties (including Canada and Mexico) added “Progressive” to its name and then suspended the whole IP chapter which included new rules for the digital age.
These agreements include unfair barriers to the exchange of U.S. goods and services. The EU, for example, has been pushing geographic indicators and data protection requirements. These take market space from U.S. firms and give it to foreign ones which otherwise wouldn’t have earned the business. Likewise, China continues to force data localization rules, remains the provenance location for 60 percent of the world’s counterfeits and is frequently accused of forced technology transfers.
A global good, laws that protect the rights of IP owners increase access to innovation and encourage tech spillovers that extend from store shelves to university labs and, most importantly, to the dreams of the next generation of innovators.
The Trump administration faces an uphill battle to protect innovation. Canada and Mexico have favored copyright and patentability policies riddled with loopholes. However, abdicating global leadership on IP rights would be the most unfair deal to future Americans.
Philip Thompson is a fellow with the Property Rights Alliance, an affiliate of Americans for Tax Reform.
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