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May 27, 2019

The New NAFTA: What Happens Now?

After President Donald Trump lifted Section 232 steel and aluminum tariffs on exports from Mexico and Canada, most news commentators said the breakthrough would pave the way for approval of the United States Mexico Canada Agreement, or USMCA, the draft trilateral trade pact that is supposed to replace NAFTA.

Not so fast, explains Politico’s “Morning Trade.” Democrats, who control the U.S. House of Representatives, have several concerns about the agreement – from labor standards, environmental provisions, access to medicines and enforcement – that they would like to correct, and they want the White House to take the lead on fixing them. House Ways and Means Chairman Rep. Earl Blumenauer, whose panel oversees trade policy, said the Trump administration needs to “start exploring” the possibility of reopening the agreement.

Senate Finance Committee Chair Charles Grassley (R-Iowa) told Politico that is unlikely to happen. He said U.S. Trade Representative Robert Lighthizer’s response would be “‘Look I negotiated a great deal for you … I’ve given you what I can give you, the Mexicans have even passed their labor reforms, so if you need anything more, lay out specifically for me what that is, tell me who I need to talk to to get this negotiated and then let’s see what we can do.’”

In a letter to congressional Democrats, President Trump said last week that USMCA approval should come before Congress passes an infrastructure spending package.

Progress is possible, however: Bloomberg reports the White House and congressional Democrats have opened talks to resolve Democrats’ concerns. U.S. House Speaker Pelosi told Ambassador Lighthizer that she would designate members of her caucus to be working group representatives to deal with labor, enforcement, environment and pharmaceutical provisions of the deal. In Canada, meanwhile, members of parliament “are still discussing whether to introduce a USMCA bill this spring and run the risk of it not passing before the federal election.”

As Connecting the Dots readers will recall, MSCI outlined its position on replacing NAFTA in comments submitted in 2017 to the Office of the U.S. Trade Representative. Those comments, which highlight the specific benefits of the countries’ trading relationship, are here.

Also as a reminder, the National Association of Manufacturers (NAM), which supports ratification of the agreement, has issued fact sheets for each U.S. state outlining the benefits of the trade deal in those individual jurisdictions. Click here to see how your state would fare.

In a national fact sheet, NAM argued the continued success of U.S. manufacturing depends on our critical North American partnerships because:

  • Canada and Mexico alone purchase one-fifth of the total value of U.S. manufacturing output.
  • Canada and Mexico purchase more U.S.-made goods than our next 10 trading partners combined despite representing only six percent of the world’s population.
  • The jobs of more than two million American manufacturing workers depend on exports to Canada and Mexico, along with more than 43,000 small and medium-sized businesses.