House Democrats and the Office of the U.S. Trade Representative say that the new NAFTA can serve as a template for future trade deals, but experts question how that might come to pass, and a key Republican wants at least one Republican priority restored in future deals.
USMCA
The U.S.-Mexico-Canada agreement is a free trade agreement between the three countries, also known as CUSMA in Canada and T-MEC in Mexico. Replacing the North American Free Trade Agreement (NAFTA) in 2020, the agreement contains a unique sunset provision where, after six years (in 2026), any of the three parties may decide not to continue the agreement in its current form and begin a period of up to 10 years where USMCA provisions may be renegotiated.
Although the Senate Finance Committee will still have a mock markup on the U.S.-Mexico-Canada Agreement, it will happen after the implementing bill has been sent to Congress, so it will be more “mock” than in past deals. The reason the process of Congress weighing in on a trade deal is a mock markup is that under fast track, or Trade Promotion Authority, Congress cannot amend the deals. But typically, the administration sends up a draft implementing bill, and then does incorporate at least some of Congress's suggestions on language before sending the final implementing bill.
If a panel of labor experts determines that a Mexican factory is violating its workers' rights to collective bargaining, the U.S. may deny the goods from that factory the tariff benefits of the U.S.-Mexico-Canada Agreement -- but that denial of tariff benefits is not automatic.
House Speaker Nancy Pelosi and Ways and Means Chairman Richard Neal announced that they have reached a deal with the Trump administration on changes to the new U.S.-Mexico-Canada Agreement. They called the changes they won over the last six months a victory for workers. They did not share many details of how the environmental, labor, enforcement and biologics provisions changed, but said the text would be shared before votes in the House of Representatives.
Even though the Democrats won some changes to the new NAFTA that are seen as contrary to business interests -- primarily, removing extended patent protection for pharmaceuticals in Canada and Mexico -- business groups celebrated House Speaker Nancy Pelosi's decision to hold a vote on the trade pact. A vote in the House is expected next week, but a Senate vote won't come until next year.
International Trade Today is providing readers with some of the top stories for Dec. 2-6 in case they were missed.
It will be easier to bring a labor case under the U.S.-Mexico-Canada Agreement than it was in previous trade deals, but several particulars remain undisclosed. There will be expedited labor enforcement that “provides for facility-based enforcement,” and if independent labor experts find that collective bargaining rights weren't honored at particular factories, it will “lead to penalties,” a summary of the changes to USMCA says. But what those penalties are is not mentioned, and members of the House Ways and Means Committee and Senate Finance Committee said they don't know what they are, as no other details beyond the memo have been shared. A Ways and Means spokeswoman and trade staffer did not answer questions.
Unions appear ready to endorse the changes Democrats won to the NAFTA rewrite, though the most radical change -- stopping goods at the border for labor violations -- isn't in the deal. On Dec. 9, AFL-CIO President Richard Trumka said to The Washington Post, “We have pushed them hard and have done quite well,” in getting changes to the U.S.-Mexico-Canada Agreement. The House Democrats pushed for changes to the USMCA on labor, the environment, the biologics data exclusivity period and overall enforcement. If the AFL-CIO endorses their changes -- as seems likely after Trumka's comment -- passage in the House could follow quickly.
A last-minute push to tighten up the steel and aluminum segment of the auto rules of origin has angered Mexico, media reports said Dec. 6. Rep. Henry Cuellar, D-Texas, had referred to this last-minute ask as not coming from House Democrats the day before (see 1912050054). The reports say that steel unions asked for a “poured and melted” standard, rather than allowing Mexican processors to take imported slab and make it into sheet metal for cars.
Twice this week, freshman Democrats elected from traditionally Republican districts called on House Speaker Nancy Pelosi to finish negotiations on the U.S.-Mexico-Canada Agreement and hold a vote for ratification. On Dec. 4, Rep. Kendra Horn, D-Okla., joined a press release from all Oklahoma House members, and she said in that release, “Finding common ground takes hard work, and we won’t cross the finish line with finger-pointing or partisan politics. As the year comes to a close, we must find a bipartisan agreement and bring the USMCA to the floor for a vote.” On Dec. 5, Rep. Cindy Axne, D-Iowa, sent a letter to House leaders that said that while she doesn't want anything in the agreement that will cause the cost of biologic drugs to increase, and she thinks labor enforcement is important to curb outsourcing competition from Mexico, she also wants a vote before the end of the year. “Overall, Iowa is the second largest agricultural exporting state in the country,” she said, and trade wars have been hurting farmers. “Modernizing our trade agreement with our two closest neighbors is critical to ensuring market stability for Iowans.”