Senate OKs North American Trade Deal To Replace NAFTA, Giving Trump A Much-Needed Win

Redit: NPR News

From left, then-Mexican President Enrique Peña Nieto, President Trump and Canadian Prime Minister Justin Trudeau participate in a USMCA signing ceremony in November 2018 in Buenos Aires, Argentina. Pablo Martinez Monsivais/AP


The Senate overwhelmingly approved a revised North American trade pact in a rare bipartisan vote Thursday that hands President Trump a victory on a key campaign promise just as lawmakers are preparing his impeachment trial.

The U.S.-Mexico-Canada Agreement, or USMCA, passed by a vote of 89-10. The trade pact, signed by the president in November 2018, received a similar bipartisan vote in the House last month.

The USMCA is meant to replace the North American Free Trade Agreement, negotiated in the 1990s by President George H.W. Bush and pushed through Congress by President Bill Clinton.

With a renegotiated trade pact with Mexico and Canada and the signing on Wednesday of an initial trade deal with China aimed at winding down a long and bitter trade war, Trump can claim to have fulfilled his pledge to get tough on trade and eliminate “bad deals” made by his predecessors.

Many economists argue that NAFTA was a substantial boost to North American economies, removing trade barriers, reducing tariffs and increasing foreign investment, particularly in Mexico.

Critics, including Trump and many Democrats, say NAFTA sent U.S. jobs across the border. The president has frequently maligned NAFTA as “perhaps the worst trade deal ever made.”

But a 2017 report by the nonpartisan Congressional Research Service concluded that the impact of NAFTA over a quarter-century was difficult to isolate.

“A major challenge in assessing NAFTA is separating the effects that came as a result of the agreement from other factors. U.S. trade with Mexico and Canada was already growing prior to NAFTA and it likely would have continued to do so without an agreement,” it said.

“In reality, NAFTA did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters,” the report said.

The new agreement does offer some modest benefits over the previous pact.

According to a report last year by the U.S. International Trade Commission, USMCA would boost gross domestic product by 0.35% after inflation, or $68.2 billion, creating 175,700 new jobs over six years, fewer on average than the U.S. economy creates in a single month.

“U.S. exports to Canada and Mexico would increase by $19.1 billion (5.9 percent) and $14.2 billion (6.7 percent), respectively. U.S. imports from Canada and Mexico would increase by $19.1 billion (4.8 percent) and $12.4 billion (3.8 percent), respectively,” according to the report.

One key feature would raise the percentage of a vehicle’s parts that must be produced in North America to avoid tariffs from 62.5% under the old NAFTA to 75% under the USMCA. The new pact would also require most of those parts to be made by workers earning at least $16 an hour — a provision designed to offset cheap Mexican labor.

The ITC report said that the changes would lead to a small increase in the retail price of vehicles.

The White House also negotiated a reduction in Canadian tariffs on U.S. dairy products, including milk powder and baby formula. But Canada accomplished one of its top priorities: saving Chapter 19, a dispute resolution mechanism that allows any country to challenge another’s trade restrictions before a neutral arbitrating body.

The best-known Chapter 19 cases under NAFTA involve disputes between Canada and the U.S. over softwood lumber and between the U.S. and Mexico over washing machines.

“Canada’s negotiating position at the very least was significantly strengthened by the determinations it was getting under the Chapter 19 process,” Matthew Kronby, a trade lawyer with Borden Ladner Gervais in Toronto, told Reuters.

Democrats used the renegotiated pact to push their own agenda, winning stronger enforcement of labor and environmental protections and managing to cut out a provision that would have granted long-term patent protection to pharmaceutical companies.

“We’re declaring victory for the American worker,” House Speaker Nancy Pelosi said last month. “It is infinitely better than what was initially proposed by the administration.”

Chairman of the House Ways and Means Committee, Rep. Richard Neal, D-Mass., called the USMCA “a new construct for trade.”

Importantly, the USMCA was supported by organized labor. Speaking last month, AFL-CIO leader Richard Trumka said while USMCA “isn’t a perfect agreement,” it was “well on its way to getting there.”

On the 2020 presidential campaign trail, Democratic hopefuls expressed some disagreement over the new pact. During Tuesday night’s debate, Vermont Sen. Bernie Sanders insisted “we could do much better than a Trump-led trade deal.”

Massachusetts Sen. Elizabeth Warren described the deal as a “modest improvement,” adding that “Sen. Sanders himself said so.”

“It will give some relief to our workers,” Warren said. “I believe we accept that relief, we try to help the people who need help, and we get up the next day and fight for a better trade deal.”

The new deal also includes provisions to protect the ozone layer, marine environment and air quality, and it establishes a fisheries management system to prevent overfishing in North American waters.

But that hasn’t been enough to satisfy environmental groups.

In a joint statement last month, the Sierra Club, the League of Conservation Voters and the Natural Resources Defense Council urged its members to oppose the USMCA. They said the new trade deal doesn’t go nearly far enough and “would encourage further outsourcing of pollution and jobs, offer handouts to notorious corporate polluters, and prolong Trump’s polluting legacy for years.”

“The deal not only fails to mention, acknowledge, or address the climate crisis, but would actually contribute to it,” they said.


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