USMCA

Oregonians to Play Key Role in Congressional USMCA Review

Oregon Congressman Earl Blumenauer and Congresswoman Suzanne Bonamici will play pivotal roles on drug pricing and environmental issues as part of the House review of the US-Mexico-Canada trade agreement negotiated by the Trump administration.

Oregon Congressman Earl Blumenauer and Congresswoman Suzanne Bonamici will play pivotal roles on drug pricing and environmental issues as part of the House review of the US-Mexico-Canada trade agreement negotiated by the Trump administration.

Next to immigration, US trade policy is one of the top priorities of President Trump. Winning congressional approval of the US-Mexico-Canada trade agreement (USMCA), which his administration negotiated, is a key plank of Trump’s 2020 presidential election agenda.

House Democrats, led by Speaker Nancy Pelosi, are the major obstacle for Trump’s ambition. Pelosi took steps this week to begin negotiations with Trump’s trade advisers and she put two members of the Oregon congressional delegation in pivotal leadership positions. She also signaled support for a labor enforcement proposal championed by Oregon Senator Ron Wyden.

Oregon Congressman Earl Blumenauer will co-chair a team focused on drug pricing, while Oregon Congresswoman Suzanne Bonamici will co-chair the team examining environmental issues.

Pelosi hasn’t committed to a House floor vote on the USMCA until changes are made, which would require further negotiations with Mexico and Canada. Without House Democratic votes, the trade deal cannot move. Trump has indicated he would like USMCA approved before Congress adjourns for its August recess. Ways and Means Chairman Richard Neal, D-Mass, expressed hope that negotiations with House work groups could wrap up in as little as 30 days. 

The delicate negotiations come in the shadow of Trump’s threats to impose escalating tariffs on all Mexican exports to the United States if the country doesn’t do more to stem the flow of migrants from Central America. Trump pulled back from imposing the tariffs after what appears to be a provisional deal was struck with Mexican leaders. He also has pulled back tariffs on steel and aluminum.

Stalemated negotiations and a continuing trade war with China also muddy the congressional water for USMCA. Even in its current form, the USMCA isn’t a slam dunk to pass the legislatures in Mexico and Canada.

The USMCA is effectively an update of NAFTA (the North American Free Trade Agreement), including provisions relating to the digital economy that didn’t exist a quarter century ago. During his presidential campaign and early in his term, Trump threatened to talk away from NAFTA. However, strong business opposition dissuaded that drastic move, which would have disrupted supply chains of US manufacturing and imperiled US agricultural markets in Mexico and Canada.

Since the USMCA was unveiled last fall, congressional Democrats and US labor leaders signaled disappointment with enforcement procedures for labor provisions aimed at closing the pay gap between Mexican and US manufacturing workers. Wyden and Ohio Democrat Sherrod Brown have proposed tougher enforcement provisions. A bipartisan, bicameral delegation of congressional trade staffers returned from a fact-finding mission in Mexico with suggestions for beefing up enforcement. They include new ways to enforce labor provisions auditing 700,000 collective bargaining agreements in Mexico, which could take years to complete.

Provisions related to drugs and environmental issues are other areas that Democrats want to bolster in the USMCA and which Blumenauer and Bonamici will influence.

US Trade Representative Robert Lighthizer and business groups representing major US exporters are lobbying for approval now. Influential Congresswoman Debbie Dingell, D-Mich, told Bloomberg News, “I talked to Ambassador Lighthizer and everyone understands the things that need to be fixed. There are a number of us who want to get a trade bill. We need a new NAFTA. People are working toward a good bill.”

 

NAFTA with a New Name

The Trump administration successfully negotiated an updated North American Free Trade Agreement with modernized provisions, concessions of value to farmers and automakers and, of course, a new name. However, politics could still undermine the deal when it goes to Congress and consternation remains among trading partners with continuing Trump tariffs on steel and aluminum.

The Trump administration successfully negotiated an updated North American Free Trade Agreement with modernized provisions, concessions of value to farmers and automakers and, of course, a new name. However, politics could still undermine the deal when it goes to Congress and consternation remains among trading partners with continuing Trump tariffs on steel and aluminum.

The Canadians agreed to final terms for a $1.2 trillion North American free trade agreement that gave President Trump a political triumph and NAFTA a new name. However, the deal doesn’t end a simmering trade war sparked by US tariffs on steel and aluminum and still faces a treacherous political road to passage.

Trade experts gave credit to the Trump administration for completing a three-way deal to update the 25-year-old trade that candidate Trump derided as terrible. Trump critics note the new trade pact is largely the same car with a rebranded nameplate to appease Trump. Peter Navarro, Trump’s trade adviser, said the foundation remains, but the superstructure is superior. 

The United States-Mexico-Canada Agreement (USMCA) still must be approved by Congress, which seems more likely after cliffhanger negotiations with Canada prevented Trump from submitting just a bilateral agreement with Mexico. The agreement also must be ratified by the respective legislative bodies in Canada and Mexico.

Most everybody agreed NAFTA needed a refresher, if for no other reason to account for a phalanx of digital industries and e-commerce that didn’t exist when it was signed. There also was a push to strengthen intellectual property protections, the underlying issue that has sparked a Trump-inspired trade war with China. There are reportedly 63 pages worth of provisions that address patents and trademarks, including two additional years of protection for biologic drugs, which Trump hailed as a key to US medical innovation.

A major sticking point was Canada’s barrier that prevents US dairy farmers from penetrating their market. The Canadians traded some of that protection to retain a trade dispute resolution provision that Trump wanted to scrap. Somewhat ironically, Canadians had agreed to a similar sized dairy concession in the Trans-Pacific Partnership, which Trump abandoned when he took office.

Domestic car manufacturing was a core reason why Trump pushed for a better North American trade agreement. The agreement reached earlier with Mexico increases the North American auto content requirements and requires more content from higher paid autoworkers to qualify for duty-free treatment. AFL-CIO leaders withheld their support for the change, saying they doubted the higher wages and better working conditions in Mexico can be enforced. The USMCA effectively requires unionization of Mexican autoworkers, which runs counter to state-level right-to-work laws, which political conservatives have pushed for in the United States.

Economists fret that higher wages will make North American vehicles more expensive and less competitive against vehicles imported from overseas, which face a nominal tariff. Trump is pledging to address the import tariff and potentially replace it with quotas. There also is a side letter to the agreement that preserves Trump’s ability to impose tariffs on automobiles assembled in Mexico or Canada. 

Trump sought a 5-year sunset clause on the deal. In the final agreement, the USMCA has a 16-year life span, with a review after six years.

A key element of the deal for the incoming Mexican president is a clause that restates Mexico’s claim of ownership of all hydrocarbons in its subsoil. The provision doesn’t prevent foreign companies from producing oil in Mexico.

While agreement on NAFTA modernization brought sighs of relief, there is still consternation over steel and aluminum tariffs – and their rationale: protecting US national security. The pretense for the tariffs has irked Canadians who don’t view themselves as security risks to the United States.

Looming elections that could flip control of the House to Democrats might complicate approval of the USMCA. Democrats may not want to bless a Trump achievement before the 2020 presidential election and Republicans may decide to poke the eye of unions, which have been a major force behind revamping NAFTA. That could leave the USMCA an agreement without a country and further muddy the waters on US trade policy.