The Craft Beverage Modernization Act, which covers beer, wine and spirits, will remain in effect through 2020, instead of expiring at the end of this year. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said that the CBMA made it into a tax extenders package that was negotiated after midnight on Dec. 17. The provision allows importers and exporters a refund on alcohol excise taxes.
The House Ways and Means Committee, with near-unanimity, recommended the U.S.-Mexico-Canada Agreement go to the floor. A vote on the replacement for NAFTA is expected on Dec. 19. For about three hours, Democrats and Republicans praised the rewrite of North America's free trade pact, though many Republicans complained that it took a year to get the opportunity to vote for it.
With the announcement of a phase one deal, Flexport chief economist Phil Levy said the promise is for stability in tariff levels -- even if the large majority of goods facing Section 301 tariffs will retain the 25 percent hike. But, he noted in a Dec. 16 webinar, many times over the last eight months, “a deal was announced, and it didn't last. That should sort of serve as a precautionary tale.” Levy, like many observers, doesn't believe that a phase two deal, that could lead to rolling back more tariffs, is likely in the next year.
Sen. Ron Wyden of Oregon, the senior Democrat on the Finance Committee, and Sen. Sherrod Brown, an Ohio Democrat who voted against NAFTA, have endorsed the NAFTA rewrite, known as the U.S.-Mexico-Canada Agreement. The two had said they would oppose the USMCA unless it included a labor enforcement mechanism that carried consequences for Mexican imports from factories that weren't honoring workers' rights.
With the last round of consumer goods imported from China spared, and a reduction in Section 301 tariffs on about $120 billion in goods that were first subject to additional tariffs Sept. 1, some business interests welcomed the de-escalation, but warned that the U.S. should stay focused on more significant economic reforms in China. The tariffs on List 4a, which are at 15 percent and apply to about 3,800 8-digit tariff lines, will go to 7.5 percent.
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.
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.
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.
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.