Trump announces USMCA deal to replace NAFTA
Corporate leaders across America watching President Donald Trump fight with Democrats fear their chances of securing the newly revised trade agreement with Mexico and Canada is slipping away.
Anxiety peaked last week after Trump’s extraordinary 17 minute argument over border wall funding with Senate Minority Leader Chuck Schumer and Nancy Pelosi, who is expected to be House speaker in January. The spat revealed the challenges Trump faces trying to reach any consensus with Democrats let alone on one of Trump’s controversial trade initiatives.
“Those concerns are real,” said John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce. “It arises from the reality that Canadian and Mexican markets are incredibly important to U.S. business and agriculture. They’re not just our two largest export markets. They buy more U.S. made manufactured goods than the next 10 countries on the list. It’s supremely important.”
Trump and the leaders of Mexico and Canada signed a revised trade agreement late last month that was supposed to end an ugly dispute among the three nations. But the new United States-Mexico-Canada Agreement can only be ratified by Congress. And Democrats, who will take control of the House, are showing they’re reluctant to hand Trump any kind of political victory.
Business leaders knew it was going to be hard, and pressed the White House as well as sent lobbyist to meet with Republican leaders about completing the deal during the lame duck session of Congress, the period between the November elections and when the newly elected members begin their terms in January.
“Manufacturers need certainty now, not later. With 2 million American jobs dependent on exports to Canada and Mexico,” National Association of Manufacturers President and CEO Jay Timmons said in a statement last month pushing for Congress to review the revised agreement before the end of the year.
But Senate Majority Leader Mitch McConnell, R-Ky., counted out that possibility. Then, Trump threatened to scrap NAFTA without the revised deal in place, leading to near-panic among business leaders that their best opportunity to ratify the new agreement had been missed.
“I don’t think people fully realize how precarious all this really is,” said one official at a major business group, who was not authorized to speak publicly about concerns. “It’s going to shake confidence in the U.S. economy like it never has been shaken before.”
The US Chamber of Commerce sounded the alarm earlier when President and CEO Tom Donohue backed the revised agreement but warned that Trump’s “threat against a co-equal branch of government” by saying he would scrap the congressionally ratified NAFTA if they don’t now take up the USMCA could cost needed votes to pass the agreement.
Murphy said losing NAFTA without passing the revised agreement would have devastating impacts on U.S. businesses that depend on trade between the countries.
The stakes are high for Missouri and Kansas, which has 145,000 jobs tied to trade with Mexico. Missouri and Mexico did $5.2 billion worth of business, and Kansas $2.7 billion. The 130-year-old railway, Kansas City Southern, for example, has invested billions of dollars on rail links into Mexico to transport agricultural and manufacture goods between the two nations.
Eric Farnsworth, a former State Department official and now a vice president of the Council of the Americas in Washington, said he doesn’t see how congressional leadership could bring up the measure unless they’re certain they have the votes to pass.
Farnsworth is pushing for passage of the USMCA trade agreement. But Farnsworth, who also worked at the Office of the U.S. Trade Representative, remembers the challenges of getting the original NAFTA through Congress in the George H.W. Bush and Clinton administrations during a time when Democrats and Republicans worked better together.
“Where does NAFTA even fit in terms of the overall agenda and is there a political moment where the two sides can come together to pass this?” Farnsworth said of the USMCA agreement. “I think that is an open question.”
The original NAFTA was signed on Dec. 17, 1992, ratified by the three countries’ the next year and went into effect in 1994.
U.S. Trade Representative officials said they were confident that Congress will approve the new agreement.
“From the beginning, Ambassador Lighthizer has worked closely with Democrats and Republicans in the House and Senate on the renegotiation of this agreement,” an official said.
Robert Lighthizer, the U.S. Trade Representative who negotiated the deal, made clear that he was constructing a deal with the Democrats’ priorities in mind, adding greater protections for labor and the environment.
But Democrats are skeptical of some provisions on labor and environment.
“While there are positive things in this proposed trade agreement, it is just a list without real enforcement of the labor and environmental protections,” Pelosi said in a statement after meeting with Lighthizer.
Congress must approve the new agreement by voting on legislation that implements the provisions under U.S. law. But no implementing bill has even been introduced to Congress.
A dozen Senate Republicans called for the White House to push to ratify the new USMCA during the lame duck or “face a possible quagmire” getting the trade agreement passed .
“We are concerned that if the administration waits until next year to send to Congress a draft implementing bill, passage of the USMCA as negotiated will become significantly more difficult,” Sen. Pat Toomey, R-Pa., wrote in a letter with 11 other Senators last month to the White House.
The official from a major business group criticized Republican leadership’s decision not to take up the matter considering McConnell did agree to take up criminal justice measures.
“We’re all a little confused why this isn’t a priority,” the official said of the USMCA. “Why are you throwing away your leverage....That criminal justice bill couldn’t wait till next year? Give me a break.”
David Popp, a spokesman for McConnell, said the majority leader made clear before the agreement was even signed that it would be a 2019 issue.
Congressional staffers added that the date of the agreement leaves no time for the committee process. Senate Finance Committee Chairman Orrin Hatch charged passage this year was impossible.
Eric Miller, a trade consultant who has worked for the Canadian government and continues to advise them on the negotiations, expects Trump will eventually carry out his threat to end NAFTA forcing Congress to decide between the new NAFTA agreement and nothing versus the new agreement versus the old one.
But he also doesn’t see much incentive for the Democrats to expend their political capital to do Trump a favor by handing him a trade victory.
“In some ways the stew is going to have to get burnt before they realize they want to do it,” Miller said. “For now, it seems like it’s a game of chicken where the prospect of a shutdown looks pretty high and the likelihood that the shutdown rolls on for a while also looks high. So within that framework, USMCA doesn’t exactly look like a likely first agenda item.”