Whither the USMCA?
There is a remote possibility, however, that the USMCA will not be put to bed in 2019
Now that the low-key signing ceremony for the United StatesMexico-Canada Agreement (USMCA) at the G20 meeting in Buenos Aires is over, the real work begins. While it won’t be as gruelling as the 13 months of rollercoaster trilateral negotiations, it won’t be a walk in the proverbial amusement park either.
The central problem lies in the actual final ratification of the North American trade pact. More specifically, after the November U.S. midterm elections, the Democrats will control the House of Representatives in early January 2019—along with chairing and dominating the pivotal House Ways and Means Committee (which needs to approve the deal before it goes for a full House vote).
Democrat Bill Pascrell from New Jersey—and the likely incoming chair of the House Ways and Means subcommittee on trade—has clearly indicated his reservations about the agreement, and “. . . whether this deal meets my standard for a better deal for American workers.”
More worrisome, some House Democrats have started to make noises about possible changes to the USMCA in order for it to get the requisite congressional votes. The last thing that the Trudeau government wants to do is to be seen as interfering in the congressional process to arm-twist and to sway votes in its favour.
It looks like the Dems and the incoming House Speaker, Nancy Pelosi, want the Mexicans to cough up some important concessions. As the party of Big Labour, the Democrats are looking to squeeze Mexico to put in place stronger language to guarantee higher wages for Mexican auto workers.
Moreover, the empowered Democrats want the Mexican government to commit firmly to allowing Mexican workers to unionize on their shop floors. In addition, they are pushing hard to get a promise from Mexico to toughen its laws on environmental protection.
A gaggle of Republicans, for their part, are also very uneasy about the deal’s clause (which Canada insisted on including) on LGBTQ worker rights (language on discrimination based on gender identity and sexual orientation). Evidently, conservative lawmakers see this as an unacceptable infringement of U.S. national sovereignty.
In a letter to the Trump Administration, they made it very clear that they will not support ratification unless this language is removed from the legal text. “A trade agreement is no place for the adoption of social policy. It is especially inappropriate and insulting to our sovereignty to needlessly submit to social policies which the United States Congress has so far explicitly refused to accept,” it explained.
These changes may cause the Trump White House to delay sending the USMCA implementation legislation up to Capitol Hill. But I can’t see Trump backing away from the trade pact now.
The Dems want to take a pot shot at President Donald Trump as they put their own stamp (and tweaking) on the USMCA. And that’s all part of how they plan to sell the deal to their partisans in 2020.
There is a remote possibility, however, that the USMCA will not be put to bed in 2019. That leaves a stalemated U.S. Congress in 2020 and the prospect of a nasty presidential election campaign. Translation: no ratified free trade agreement.
The old NAFTA would then kick back into place, which is just as well as far as Canada is concerned. But that would still leave the outstanding trade disputes over softwood lumber and punishing Section 232 tariffs on Canadian steel and aluminum.
In the end, though, the Democrats are likely to hold their noses and ratify the USMCA with some specific amendments and minor tinkering. They have no interest in re-fighting the old NAFTA or a NAFTA 2.0 pact in the 2020 presidential election. And after backing the earlier Trans-Pacific Partnership (TPP) deal (favoured by the former Obama Administration), they would be raked over the coals if they blocked the USMCA.
Final ratification probably won’t be easy mind you, but Canada will eventually get its modified NAFTA. There are just too many forces aligned in favour of the deal in Washington, Mexico City and Ottawa for it to all fall apart now.