Many Questions Remain as Congress Takes Over on 'USMCA'
As effusive as President Donald Trump was about the significance of his NAFTA rewrite, he was cautious about its chances of getting through Congress next year. Polls suggest Democrats could retake the majority in the House of Representatives, and there is a significant number of Democrats voted against the original NAFTA, or who pledged to vote against the Trans-Pacific Partnership. The earliest a vote could come, because of timelines laid out in fast track, would be in February. But it's likely to be later, since that doesn't include the time needed for Congress to draft implementing legislation.
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"Anything you submit to Congress is trouble," Trump said at an Oct. 1 White House press conference announcing the agreement. He said that while even Democrats are saying the improvements to the labor chapter are amazing, they could well oppose it. "They’ll say Trump likes it, therefore we can’t approve it, that would be good for Republicans," he said. "Frankly they’ll have 2020 in mind." Some observers agree with his assessment, that a rejection by Democrats will be more about the politics than the substance of the treaty (see 1809120025).
Phil Levy, senior fellow on the global economy at The Chicago Council on Global Affairs, said he gives the new NAFTA less than a 50 percent chance of getting through Congress. He said most Democrats -- like Trump -- have painted NAFTA as the reason for lost manufacturing jobs, and accepting a rewrite, even one aimed at bringing jobs back, will reveal in time that improving the deal wasn't enough to reverse the trend.
"If you say ‘awesome but not enough’ you keep it as an issue," he said.
Rep. Richard Neal, D-Mass., represents a part of his state that has experienced de-industrialization, and he noted he voted against NAFTA when he reacted to the new deal. Neal is in line to take over the House Ways and Means Committee if the Democrats win a majority in the November elections. He said Democrats will have to assess whether the new NAFTA is better than TPP and the old NAFTA in enforcement of worker rights in Mexico, and in environmental protections. “The bar for supporting a new NAFTA will be high," he said.
Trump promised that under USMCA -- his name for NAFTA 2.0 -- "our companies won’t be leaving the United States, firing their workers and building their cars elsewhere. They no longer have that incentive. That was to me the most important thing."
Rep. Rosa DeLauro, D-Conn., also from a part of New England that suffered major manufacturing losses, pointed to ending the incentive to move jobs to lower-wage Mexico as her top issue. DeLauro, a leader in the trade-skeptic caucus and a "no" vote on the original NAFTA, sounded almost conciliatory in her statement Oct. 1. “I appreciate United States Trade Representative Lighthizer’s sustained efforts to address some of these concerns throughout this renegotiation," she said. "Still, we must reserve final judgment until we have a full and clear understanding of all the details -- including implementing language that requires significant input from Congress."
Senate Minority Leader Chuck Schumer, D-N.Y., also voted against NAFTA. He said "The president deserves praise for taking large steps to improve it. ... Labor provisions are good, but too often they are written into trade bills and never enforced." He said he looks forward to helping to write implementing legislation "to ensure the deal actually achieves these goals" of opening Canada's dairy market and improving worker rights in Mexico.
Mark Warner, a lawyer who practices in Toronto and New York on U.S.-Canadian trade issues, says what the U.S. won on dairy surprised him. Not only is the Class 7 quota eliminated -- which reversed New York, Wisconsin and Vermont farmers' ability to sell an ultrafiltered milk used in cheese -- but the amount of sales under the broader quota system is more generous than either what the U.S. would have gotten in TPP or what Europe got in its Canadian free trade agreement.
"Canada gave much more on dairy than I would have expected, to save Chapter 19," Warner said. Three lobbies for milk producers cheered Canada's concessions, in a press release titled "U.S. Dairy Organizations Thank Trump Administration for Concluding New Trade Agreement with Canada, Mexico." Jim Mulhern, CEO of the National Milk Producers Federation, called it "incremental progress," and the head of the International Dairy Foods Association hailed the end of Class 7.
But some who represent dairy interests are not declaring victory. Rep. Ron Kind, D-Wis., a member of the Democrats' pro-free-trade caucus, said he will keep pressing the administration to get the best deal for dairy producers.
It's not just the left flank that the U.S. trade representative's congressional liaison has to worry about. Some in the Republican party have criticized the changes to rules of origin as too much government interference with the free market. "The other big question on this is where are the Republican votes?" Chicago Council's Levy asked. "Where’s the Chamber going to be? What are the automakers going to say? How much do they have their ducks in their row and have they counted votes?"
Sen. Pat Toomey, R-Pa., is one of the critics on the right. He said: "While the administration's proposal improves some elements of the existing NAFTA, such as strengthened [intellectual property] rights, increased market access for U.S. dairy processors, and a new chapter on digital trade, other provisions diminish NAFTA's economic benefits and create needless uncertainty. Specifically, I am concerned about the proposal's new expiration date; weakening of protections for U.S. investors; new arbitrary wage mandates on auto imports; side deals establishing quotas on automobile and automobile parts imported from Mexico and Canada; and a failure to eliminate section 232 tariffs on steel and aluminum."
He said he'll review the text to see whether on balance, USMCA is better than NAFTA.