USMCA

The new NAFTA will reverse outsourcing decisions in the auto industry, the U.S. Trade Representative's annual report on the trade agenda said, and one of the administration's top priorities for 2019 is to get Congress to ratify it. The report, which spends 26 pages on this year's agenda and the rest laying out the status of current free trade agreements, negotiations and enforcement actions during 2018, was released late March 1. Generally, the report defended the administration's actions, arguing they're not protectionist but rather pro-worker, and noting that both imports and exports grew in high single digits during the first 11 months of 2018.

Agriculture Secretary Sonny Perdue told the House Agriculture Committee that a failure to ratify the NAFTA replacement "would be devastating," and he said he hopes all House members understand how damaging that would be to the agricultural economy. Perdue said there's a lot of energy and momentum among the groups lobbying for passage, but acknowledged that "the trickiness of the [Section] 232s" makes it more difficult to get the deal through. Because of the Section 232 tariffs on steel and aluminum, Mexico and Canada are levying tariffs on U.S. pork, cheese and other agricultural products.

Although the main topic of the hearing was China, U.S. Trade Representative Robert Lighthizer told House Ways and Means Committee members repeatedly Feb. 27 that if they don't ratify the U.S.-Mexico-Canada Agreement, there will be no trade agenda for the next several years. "If we don’t pass USMCA, it says we don’t have a consensus," he said. Lighthizer also said: "It’s clearly better than its predecessor, it’s no question. Millions and millions of people are affected [by NAFTA]. You just have to pass it."

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, thinks passing the new NAFTA is urgent, but he acknowledged that not much will happen on Capitol Hill until the White House offers its implementing legislation. "The timeline begins when the president sends the [U.S.-Mexico-Canada Agreement] up to Congress, so we don't worry about it until then," he said. Grassley said that while the administration is deciding how to lift the metals tariffs on Canada and Mexico, he is planning to talk to Democrats about what they need to have changed in the agreement to vote yes. "I would like to have very specifically set out what it takes in the area of environment, labor and enforcement to satisfy the Democrats," Grassley said in a phone call with reporters Feb. 26. He said again that whatever they're asking for has to be accomplished without reopening negotiations (see 1902130049).

The U.S. Chamber of Commerce-organized USMCA Coalition launched Feb. 26, with many of the major trade players -- UPS, the Detroit automakers, the farm bureau, the American Apparel and Footwear Association -- and some notable absentees -- foreign automakers, aerospace firms.

Jerry Dias, national president of Canada's UNIFOR syndicate, said that before NAFTA, Canada had a small trade surplus in goods with the world, but now it has a $120 billion deficit. He said that General Motors, while closing plants in Canada, doubled its capacity in Mexico. Mexican consumers buy 240,000 GM vehicles a year, and Mexico is on the cusp of producing 1 million vehicles, he said. "And guess where those jobs come from? Canada and the United States." Dias said Canada has lost 500,000 manufacturing jobs in the nearly 25 years that NAFTA has been in place. "Tell me why I should celebrate?"

Kentucky Gov. Matt Bevin says there shouldn't be steel and aluminum tariffs on Canadian products, but expressed confidence that the Trump administration will make the situation right eventually. Bevin is a Republican who leads a state that is third-highest in auto industry jobs as a proportion of the workforce. "I wish people would just have patience," he said at a Feb. 21 event sponsored by the Canadian American Business Council. He suggested the reason the tariffs are still in place is "there's a limited amount of bandwidth" at the Office of the U.S. Trade Representative, and they have "a limited amount of ability to fight all these fires at once."

Trade is critical to manufacturing's success, because only 5 percent of the world population is in the United States, the head of the largest industrial trade group said Feb. 20. "If our economy is going to succeed, if we’re going to stay on top, we need to sell the things Americans make to those people [around the world] -- before someone else does," National Association of Manufacturers CEO Jay Timmons said in Houston on a speaking tour promoting manufacturing careers. "Being part of a strong world economy raises standards of living here at home and reduces poverty around the globe." He said manufacturers are counting on Congress to ratify the new NAFTA, known as the U.S.-Mexico-Canada Agreement, quickly, because Canada and Mexico are America's most important trading partners. And, he added, "we want to see the administration come to an agreement to hold China accountable. China cheats -- plain and simple. And it hurts us here in America. And the tariffs on their products and on ours? Well, they hurt manufacturers, too. China is the most challenging market in the world -- but it also has big opportunities. So, a trade agreement between the two countries would not only fix those problems and set new rules -- it would be historic."

The approach to a future bill that would give Congress the ability to intervene on Section 232 tariffs will depend on what version can get the broadest bipartisan support, Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told reporters Feb. 13. He said he doesn't have his mind made up on what has to be in the bill to constrain Section 232 actions. He said his staff is "moving very quickly" to put together a bill that "shows the appropriate respect to [Sen. Pat] Toomey and to [Sen. Rob] Portman," Republican committee members who have each authored bills that would constrain the president on the tariffs (see 1901310029 and 1902120033)

An alliance of trade groups and business groups -- including PhRMA, the National Chicken Council and the International Association of Drilling Contractors -- is funding the Pass USMCA Coalition, which will lobby for ratification of the new NAFTA, called the U.S.-Mexico-Canada Agreement. Rick Dearborn, former deputy chief of staff for President Donald Trump, is executive director of the group, and former Obama administration Commerce secretary Gary Locke is honorary chairman.