U.S. gov’t breaks without rat­i­fy­ing trade deal

The Prince George Citizen - - News - Mike BLANCHFIEL­D

OT­TAWA – Cana­di­ans will likely en­ter a fall elec­tion with the new North Amer­i­can free trade deal hang­ing in the bal­ance, as Prime Min­is­ter Justin Trudeau said Mon­day he’s not rush­ing to rat­ify the pact in the face of U.S. po­lit­i­cal dif­fer­ences.

The Demo­crat-con­trolled U.S. House of Rep­re­sen­ta­tives be­gan its five-week sum­mer break on Mon­day without in­tro­duc­ing a rat­i­fi­ca­tion bill – a sce­nario Trump and his cab­i­net worked hard to avoid.

The Democrats want changes to the United States-Mex­ico-Canada Agree­ment, or USMCA. They want to change pro­vi­sions on labour, the en­vi­ron­ment, patent pro­tec­tion for drugs and en­force­ment, and have by all ac­counts been work­ing hard with Trump’s trade czar Robert Lighthizer to move for­ward.

“We rec­og­nize that there is a dif­fi­cult par­ti­san con­text in Wash­ing­ton right now be­tween the Democrats and the Repub­li­cans. We have said from the very be­gin­ning that we would keep pace with the Amer­i­can process on rat­i­fi­ca­tion of the new NAFTA ac­cords,” Trudeau said at an event in Van­cou­ver.

“But we will do that in line with the Amer­i­can process when it picks up again this fall.”

Ever-tick­ing po­lit­i­cal clocks in both coun­tries mean U.S. law­mak­ers – with one eye to­wards Trump’s 2020 re-elec­tion bid – won’t be in a po­si­tion to take even the most ten­ta­tive steps for­ward on the deal be­fore the start of Canada’s fed­eral elec­tion cam­paign, which is set to be­gin by mid-Septem­ber at the lat­est.

Cana­di­ans head to the polls on Oct. 21.

“I do not see that there will be a vote on the USMCA im­ple­ment­ing bill by the U.S. Congress prior to the writ drop­ping for the Cana­dian elec­tion. The ear­li­est that the USMCA im­ple­ment­ing bill could be in­tro­duced is Sept. 9 and there likely will be com­mit­ted hear­ings in both cham­bers of Congress on the mat­ter,” said Dan Ujczo, the Ohio-based trade spe­cial­ist with the firm Dick­in­son Wright.

A de­lay isn’t nec­es­sar­ily a bad thing, said Mered­ith Lilly, a Car­leton Univer­sity trade ex­pert.

“The ex­ist­ing NAFTA, which re­mains in ef­fect, is a bet­ter deal for Canada than the USMCA. So, the cur­rent sit­u­a­tion is not a bad one for Canada, bear­ing in mind that on­go­ing un­cer­tainty is gen­er­ally neg­a­tive for in­vest­ment here.”

Trudeau re­it­er­ated his gov­ern­ment’s po­si­tion that the sta­tus quo is ac­cept­able. “We of course ben­e­fit right now from the ex­ist­ing NAFTA that en­sures that Cana­di­ans are well-served with good and re­li­able ac­cess to the North Amer­i­can mar­ket.”

NDP Leader Jag­meet Singh said his party shares key con­cerns of U.S. Democrats. Both par­ties want to strengthen labour en­force­ment pro­vi­sions to en­sure Mex­ico de­liv­ers on its promised re­forms of work­ers’ rights, and they op­pose the ex­ten­sion of patent pro­tec­tion for some new drugs from eight years to 10, which would de­lay the ar­rival of less costly generic prod­ucts on the mar­ket.

“It doesn’t make sense to rush ahead with some­thing where we know the Democrats in Congress are work­ing to make it bet­ter,” Singh said on Mon­day.

Trade ex­perts in Canada and the U.S. are di­vided on whether the de­lays may raise the odds of Trump in­vok­ing the six-month no­tice pe­riod to with­draw from NAFTA - a threat he re­peat­edly made dur­ing the tense rene­go­ti­a­tion of the pact that he pushed on Canada and Mex­ico.

Cyn­dee Todgham Ch­er­niak, a Toronto-based in­ter­na­tional trade lawyer, said the Democrats are likely to want sub­stan­tive changes that could leave the deal in limbo for many months. In the mean­time, the Democrats will be sharp­en­ing their talk­ing points on USMCA to use against Trump in the 2020 U.S. elec­tion.

And that could set Trump off, she said.

“He might say that Prime Min­is­ter Trudeau was not ef­fec­tive in get­ting Congress to pass the USMCA prior to now. And if they don’t come back un­til Septem­ber, and if the Democrats want to use this as a talk­ing point in con­nec­tion with the U.S. elec­tion, he might lash out at the Trudeau gov­ern­ment.”

Trudeau met Demo­cratic House Leader Nancy Pelosi on Capi­tol Hill af­ter his White House meet­ing with Trump last month. Trump, at the time, said he was pleased Trudeau would be talk­ing to Democrats.

Lawrence Her­man, a Toronto in­ter­na­tional trade spe­cial­ist, said it is un­likely Trump would pull the plug on the new NAFTA so close to his own elec­tion cam­paign be­cause it would sow eco­nomic un­cer­tainty that wouldn’t ben­e­fit him po­lit­i­cally.

“As well, if as many ex­perts be­lieve, the U.S. is head­ing into a pe­riod of eco­nomic slug­gish­ness, the threat of NAFTA with­drawal and the un­cer­tainty that would un­leash in the pe­riod lead­ing up to the 2020 elec­tion would prob­a­bly be a dis­in­cen­tive to Trump em­bark­ing on such a move.”

Ujczo said it is un­likely Trump would serve no­tice to with­draw, but even if he did, Congress or the courts could step in to de­lay that.

“The NAFTA will be in place through 2019. It is un­likely that com­pa­nies will face a sce­nario where nei­ther the NAFTA nor USMCA is in place dur­ing 2020,” he said.

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