nafta, usmca

U.S., Canada, Mexico sign USMCA trade agreement to replace NAFTA

Deputy Prime Minister of Canada Chrystia Freeland, left, Mexico’s top trade negotiator Jesus Seade, center, and U.S. Trade Representative Robert Lighthizer, sign an update to the North American Free Trade Agreement at the national palace in Mexico City.

 

MEXICO CITY/WASHINGTON — Top officials from Canada, Mexico and the United States signed a fresh overhaul of a quarter-century-old trade pact on Tuesday that aims to improve enforcement of worker rights and hold down prices for biologic drugs by eliminating a patent provision.

The signing ceremony in Mexico City launched what may be the final approval effort for U.S. President Donald Trump’s three-year quest to revamp the 1994 North American Free Trade Agreement (NAFTA), a deal he has blamed for the loss of millions of U.S. manufacturing jobs.

The event at the National Palace was attended by Mexico President Andres Manuel Lopez Obrador, Canadian Deputy Prime Minister Chrystia Freeland, U.S. Trade Representative Robert Lighthizer, and U.S. White House adviser Jared Kushner.

The result of a rare show of bipartisan and cross-border cooperation in the Trump era of global trade conflicts, the deal was inked the same day as he became the fourth U.S. president in history to face formal impeachment.

“They approved it today of all days,” Trump told reporters at the White House, calling it the “silver lining” of impeachment.

The pact quickly got bogged down in more party division, however, as U.S. Senate Majority Leader Mitch McConnell said he would likely wait for a vote on the deal until after the impeachment trial — likely kicking ratification into next year. Friction also emerged over how intrusive foreign enforcement of labor rules would be in Mexico.

Nonetheless, Lighthizer called it “a miracle” that unions, businesses and actors from across the political spectrum had come together, saying it was a testament to the benefits of the deal. Lopez Obrador credited Trump for working with him, while Freeland celebrated a win for multilateralism.

“We have accomplished this together at a moment when, around the world, it is increasingly difficult to get trade deals done,” she said.

The U.S.-Mexico-Canada Agreement (USMCA) was signed more than a year ago to replace NAFTA, but Democrats controlling the U.S. House of Representatives insisted on major changes to labor and environmental enforcement before bringing it to a vote.

The delay at times threatened to scuttle the deal, creating investment uncertainty in all three countries and worrying U.S. farmers already suffering tariffs stemming from Trump’s trade war with China.

Intense negotiations over the past week among Democrats, the Trump administration, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage. Both Canada and the U.S. House Ways and Means Committee said the deal included a mechanism for verification of compliance of union rights at the factory level in Mexico by independent labor experts.

“It is infinitely better than what was initially proposed by the administration,” House Speaker Nancy Pelosi told a news conference, adding that USMCA was now ready for a House vote.

Both the U.S. United Steelworkers union and the AFL-CIO labor unions endorsed the revised deal.

However, Mexico’s chief negotiator Deputy Foreign Minister Jesus Seade said all disputes would be resolved through panels, and denied there would be anything like foreign labor inspectors in Mexico.

There was no immediate sign of the agreement being made public.

Some Mexican business groups fear that Lopez Obrador and Seade have ceded too much.

Gustavo Hoyos, president of employers federation Coparmex and a vocal Lopez Obrador critic, called the government “a bad negotiator.” Other business groups focused on the positive and welcomed the looming end to months of uncertainty.

Seade himself said some of the changes were reasonable but not necessarily “good for Mexico.”

 

New wrinkle

Republican and Democratic U.S. lawmakers say there is broad support for revising the pact, which backers say encompasses $1.2 trillion in annual trade across the continent and supports 12 million U.S. jobs and a third of American agricultural exports. Canada’s parliament and Mexico’s congress are expected to ratify the deal without major complications.

U.S. House Ways and Means Committee Chairman Richard Neal, a Democrat, said sections of the text would be reviewed by lawmakers, but he saw no reason for “unnecessary delays” in bringing it to a vote on the House floor.

However, in a new wrinkle to swift ratification in the United States, McConnell said the Republican-controlled Senate would not take up the deal before congressional recess, potentially pushing the vote into next year.

That seemed to put him at odds with Trump spokeswoman Stephanie Grisham, who said the White House would “push hard” to get the implementing bill passed before year end. Pelosi spokesman Henry Connelly said McConnell had “no excuse” not to bring up USMCA, pointing to fast approvals of previous trade pacts.

Trump launched a renegotiation of NAFTA in his first year in office, intent on delivering on his 2016 campaign promise to replace what he has derided as the “worst deal ever.” Canadian and Mexican leaders reluctantly agreed to join the negotiations with their largest trading partner.

“America’s great USMCA Trade Bill is looking good. It will be the best and most important trade deal ever made by the USA. Good for everybody,” Trump tweeted on Tuesday. “Importantly, we will finally end our Country’s worst Trade Deal, NAFTA!”

For Democrats, the deal serves as a retort to Trump and Republican assertions that their only agenda was pursuing his impeachment.

In addition to the labor provisions, Democrats said they won elimination of a 10-year data exclusivity period for biologic drugs from the agreement, which they feared would lead to higher U.S. drug prices.

But Pelosi said she lost her bid to remove liability protections for internet service providers, a provision she had called a “giveaway” to big tech companies.

Lighthizer included a last-minute demand of Mexico for a tighter definition of steel and aluminum in the deal’s automotive rules of origin – to be “melted and poured” in North America. While USMCA originally required 70% of the metals used in North American vehicle production come from the region, it did not specify production methods, opening the door to the use of semi-finished metals from China and elsewhere.

Mexico and Canada agreed to a seven-year phase-in of the new standard for steel, Mexican officials said. The aluminum demand was dropped, but with the caveat that it would be reconsidered in 10 years.

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nafta, usmca

Pelosi, Trump and unions may be in agreement on USMCA trade deal


WASHINGTON — House Democrats have reached a tentative agreement with labor leaders and the White House over a rewrite of the U.S.-Mexico-Canada trade deal that has been a top priority for President Donald Trump.

“I’m hearing very good things, including from unions and others that it’s looking good. I hope they put it up to a vote, and if they put it up to a vote, it’s going to pass,” Trump said Monday. “I’m hearing a lot of strides have been made over the last 24 hours, with unions and others.”

The tentative accord was revealed by a Democratic aide not authorized to discuss the talks and granted anonymity because the agreement is not official.

Details still need to be finalized and the U.S. Trade Representative will need to submit the implementing legislation to Congress. No vote has been scheduled. U.S. Trade Representative Robert Lighthizer and White House senior adviser Jared Kushner are due to fly to Mexico City on Tuesday to try to pin down final details of the agreement, an administration official told Reuters late Monday afternoon.

The new, long-sought trade agreement with Mexico and Canada would give both Trump and his top adversary, House Speaker Nancy Pelosi, a major accomplishment despite the turmoil of his likely impeachment.

Pelosi, D-Calif., still has to officially sign off on the accord, aides said.

The new trade pact would replace the 25-year-old North American Free Trade Agreement, which eliminated most tariffs and other trade barriers involving the United States, Mexico and Canada. Critics, including Trump, labor unions and many Democratic lawmakers, branded NAFTA a job killer for America because it encouraged factories to move south of the border, capitalize on low-wage Mexican workers and ship products back to the U.S. duty free.

Weeks of back-and-forth, closely monitored by Democratic labor allies such as the AFL-CIO, have brought the two sides together. Pelosi is a longtime free trade advocate and supported the original NAFTA in 1994. Trump has accused Pelosi of being incapable of passing the agreement because she is too wrapped up in impeachment.

Democrats from swing districts have agitated for finishing the accord, in part to demonstrate some accomplishments for their majority.

By ratifying the agreement, Congress could lift uncertainty over the future of U.S. commerce with its No. 2 (Canada) and No. 3 (Mexico) trading partners last year and perhaps give the U.S. economy a modest boost. U.S. farmers are especially eager to make sure their exports to Canada and Mexico continue uninterrupted, as are automakers whose parts and vehicles cross the three nations’ borders, sometimes multiple times during production.

Trade Representative Lighthizer last year negotiated the replacement agreement with Canada and Mexico. But the new USMCA accord required congressional approval and input from top Democrats like Pelosi and Ways and Means Committee Chairman Richard Neal of Massachusetts, who have been engaged in lengthy, detailed negotiations over enforcement provisions and other technical details.

Republicans leaders and lawmakers have agitated for months for the accord but Pelosi has painstakingly worked to bring labor on board. Democrats see the pact as significantly better than NAFTA and an endorsement by AFL-CIO President Richard Trumka could be the key to winning significant Democratic support.

The pact contains provisions designed to nudge manufacturing back to the United States. For example, it requires that 40% to 45% of cars eventually be made in countries that pay autoworkers at least $16 an hour — that is, in the United States and Canada and not in Mexico.

The trade pact picked up some momentum after Mexico in April passed a labor-law overhaul required by USMCA. The reforms are meant to make it easier for Mexican workers to form independent unions and bargain for better pay and working conditions, narrowing the gap with the United States.

Mexico ratified USMCA in June and has budgeted more money later this year to provide the resources needed for enforcing the agreement.

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