New trade agreement would hinge on cooperation

to politics and technology occur.

There are two main policy areas of difference within USMCA, both of which affect workers in Ohio: agriculture and the automotive industry. Given that inter-North American trade accounts for at least 6 percent of Ohio’s gross domestic product, it is an important component of our local economy. In agriculture, the most significant change is greater American access to Canada’s longprotected dairy market. This is a major concession on the part of Trudeau’s government, but it was negotiated as a means of protecting the Canadian softwood lumber industry — long a special interest of Ottawa.

In the automotive sector, USMCA advocates for a greater share of all vehicles to be built in North America (from 62.5 percent of all parts to 75 percent), and with higher wages for workers (at least $16/hour). Essentially this change means two things: Fewer parts will be made in China and Mexico will have to compete on a more level playing field with workers in Canada and the United States.

USMCA does not specifically reference the recent tariffs on steel and aluminum issued by the Trump administration. For both Trudeau and Mexican President Enrique PeñaNieto, their hope is that membership within USMCA will eventually provide them with more favorable terms in both steel and aluminum. Several annexes on contentious areas of policy remain from the NAFTA era, with built-in protections for all three economies in areas considered sacred to domestic constituents.

Much of these protections remain from previous agreements such as NAFTA in 1994, the Canada-US Free Trade Agreement of 1988, the Auto Pact of 1965 and even a 1909 agreement on water boundaries between American and British officials, who were still responsible for negotiating foreign policy issues on the part of Canada at that time. In this sense, USMCA has some very new and updated features but still rests on longstanding North American cooperation on matters of trade and politics.

The potential weakness of USMCA is future price increases. With more reliance on North American labor and higher wages, it is possible that prices for vehicles will increase. Any increase could be mitigated, however, by improvements to the manufacturing processes, or if energy prices continue to rise, which undercuts cheaper Chinese labor in the manufacturing process since these parts have to traverse the Pacific Ocean to get to the North American market.

It is also still premature to discuss USMCA as a final deal. Mexico’s new president, Andrés Manuel López Obrador, starts on Dec. 1, so officials in Mexico City are trying to work quickly to pass USMCA through its parliament before his arrival. It is not yet clear how the Trump-López Obrador relationship will develop; so far, despite vast ideological differences, the two leaders might maintain a reasonable working relationship, but much could change quickly.

Both Canada and the United States require similar parliamentary approval. In Canada, Trudeau’s Liberal Party government has a majority, so the passage of USMCA is not in doubt. Trudeau will likely gain support from some members of the Conservative Party as well. In the United States, the forthcoming midterm elections raise the stakes in Washington, D.C.

Although USMCA will likely pass both houses of Congress, partisan politics could theoretically interrupt this new agreement. If they were not already important enough, November’s midterm elections just became more vital to both Republicans and Democrats.