USMCA: Approval and Economic Boost in Sight



(A modified version of the following article first appeared in the U.S. political website “The Hill.” It is being republished in Pulse News Mexico with specific prior permission.)

A big push is under way to achieve approval in the U.S. House of Representatives for the newly amended United States-Mexico-Canada Agreement (USMCA), the new NAFTA, before the end of the year. The deadline goal appears to be congressional action by Dec. 20, at the latest.

Supporters of USMCA are working hard to complete the procedures needed for action by in the U.S. House of Representatives and to secure as many votes as possible there for the agreement, so the USMCA heads to the U.S. Senate with a strong bipartisan endorsement.

The Mexican Senate rapidly approved the most recent amendments to the agreement on Dec. 12. The U.S. Senate will not consider it until early 2020, however. The Canadian parliament also needs to approve the amended trade accord.

Absent rapid U.S. approval, the USMCA could languish until 2021 after U.S. presidential elections. That would leave the continent’s economies under a cloud of uncertainty. Approving the USMCA, on the other hand, could bring a needed economic boost to the millions of jobs supported on all three countries by the commerce with the United States’ two largest trade partners.

Negotiations between Democrats in the House of Representatives and the United States Trade Representative (USTR) resolved key issues where the Democrats sought changes — labor rights, environmental protections, shorter intellectual property protections for biologic drugs and stronger enforcement mechanisms, especially on labor issues where Democrats worried about Mexico’s performance.

The final round of negotiations then addressed Mexican concerns with some of the proposed U.S. changes.

Mexico’s president and major business groups want the agreement approved soonest. The Mexicans accepted a strengthened dispute settlement mechanism that uses panels of experts as a means of dealing with alleged violations of labor commitments, as well as a new system for inspections and enforcement if violations of commitments are not resolved. The three countries signed a protocol, which embodies last-minute adjustments, so that the U.S. House Democrats would agree to the USMCA.

Other last-minute objections and efforts to influence specific USMCA provisions needed to be addressed, including some lingering unhappiness in the U.S. Senate. Businesses and farmers in the United States and across North America are pushing hard to finalize the amended USMCA. U.S. unions demanded tougher, actionable provisions to sanction any Mexican violations of the labor rights commitments in the USMCA and settled for the final changes negotiated.

The major advantage of approving the USMCA now is that a trade agreement supported by the Donald Trump administration could bring welcome certainty to the vital North American marketplace that repeatedly has been rocked by U.S. tariffs and trade threats over the past two years. The resulting uncertainty has impeded planning and investment by farmers and businesses, and imposed heavy costs to ongoing trade that supports an estimated 12 million U.S. jobs and millions more in Mexico and Canada.

Approving the tweaked final agreement faces a series of hurdles. The short timetable before the U.S. presidential campaign goes into full swing means approval must come quickly. There are other major items on the U.S. Congress’s agenda, including the impeachment process that can distract.

The key actors need to sort through the pros and cons of acting now. House Speaker Nancy Pelosi (D-Calif.) has given her nod for the USMCA to go to the House floor for a vote in the next week. She weighed the benefits of approving an agreement now that President Trump will claim as a major accomplishment versus holding off until after the 2020 elections and allowing uncertainty to remain a powerful drag on the North American economy.

It appears that she concluded that moving ahead now would demonstrate that the Democrats can do the nation’s business despite proceeding with impeachment and that democratic legislators, especially in swing districts, will be aided by taking action that can boost jobs and the economy. Without action by the Democrats in the House of Representatives, Trump and Republicans would have blasted Democrats for harming the U.S. economy during the upcoming election campaign. Pelosi worked hard to sustain goodwill with key Democratic constituents, notably unions, with the amendments that were agreed.

Both Mexico and Canada have the United States as their major commercial partner, and both want a good trade agreement as soon as possible. Both want a buffer against unpredictable U.S. actions going forward. Both recall President Trump’s earlier threats to pull out of NAFTA.

Mexico, in particular, has passed major labor reforms to protect workers’ rights, which will meet USMCA commitments, and just recently approved significant funding to implement the reforms. Mexico’s president, Andrés Manual López Obrador (AMLO), several times has assured Democrats that he is serious about implementing the labor reforms.

The last-minute renegotiations were productive in hammering out proposals that the Mexican government, the U.S. administration and congressional democrats all felt met their needs. That set of compromises opened the door for an expeditious House vote this month, in which the three governments and their key internal constituencies will all emerge as winners.

The new agreement is not perfect. Prompt approval of the USMCA will, however, allow the United States, Mexico and Canada to avoid another 18 months of uncertainty and unpredictability on trade and investment. Rapid approval of the agreement could provide a needed boost to the economies of the United States and its neighbors. The signs are positive. Now, the U.S. Congress needs to act.

Earl Anthony Wayne is a public policy fellow at the Woodrow Wilson Center and career ambassador (ret.) from the U.S. Diplomatic Service, where he served as U.S. ambassador to both Mexico and Argentina, as well as assistant secretary of State for economic and business affairs. He is also the co-chair of the Wilson Center’s Mexico Institute Advisory Board and a Diplomat in Residence at American University’s School of International Service. Duncan Wood is the director of the Wilson Center’s Mexico Institute. Christopher Wilson is deputy director of the Wilson Center’s Mexico Institute.


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