After two years of will-they-or-won’t-they posturing by the Democratic leadership, it looks like the U.S.-Mexico-Canada Agreement (USMCA) is finally moving ahead. House Speaker Nancy Pelosi (D-CA) announced that Congress will hold a vote next week to ratify the new version of the North American Free Trade Agreement (NAFTA). The deal is expected to go through without much opposition from either side of the aisle. Is this a win for President Donald Trump or the Democrats ahead of the 2020 election? Or, after all the political theater and handwringing, is the USMCA a victory for the people?
Transformative and Triumph
Democratic representatives appeared in front of reporters and cameras to discuss their participation in USMCA deliberations. Their focus, according to Rep. Richard Neal (D-MA), was “enforcement, enforcement, enforcement.” He explained that provisions of the USMCA needed to be enforced, otherwise, what good would the deal do?
The biggest point of contention for the Democrats was Mexico’s labor standards. As part of the deal, the Mexican government has to implement a series of environmental and labor reforms, but Democrats argued that enforcement and standards did not go far enough. For instance, Democrats wanted to ensure that labor disputes in the public and private sectors are fair to workers. This prompted Ottawa to intervene and help Mexico construct a similar system to theirs, which includes certifying unions.
Democrats also informed the press that they pushed U.S. trade negotiators to remove aspects that benefited American pharmaceutical companies. A couple of these consisted of giving the drug juggernauts 10- and 12-year market exclusivity and greater patent control (rivals would be prevented from even adjusting one or two ingredients of a drug), which would have prevented generic alternatives from coming to market. This might provide some relief in prices.
In the end, Neal described the USMCA as “transformative,” a “triumph for organized labor” and “for workers everywhere across America.” Pelosi echoed that sentiment:
“There is no question of course that this trade agreement is much better than NAFTA, but in terms of our work here, it is infinitely better than what was initially proposed by the administration.”
President Trump also tweeted before the Democrats’ press conference:
“America’s great USMCA Trade Bill is looking good. It will be the best and most important trade deal ever made by the USA. Good for everybody – Farmers, Manufacturers, Energy, Unions – tremendous support. Importantly, we will finally end our Country’s worst Trade Deal, NAFTA.”
In addition to what was recently announced by the Democrats, what else can we expect?
USMCA vs. NAFTA – What’s the Difference?
Is there really a stark difference between NAFTA and the USMCA? They share many similarities, but some unique elements satisfy all parties.
The biggest contrast is the sunset clause, which initially had perturbed Canadian Prime Minister Justin Trudeau. Under the USMCA, the countries can withdraw from the pact with six months’ notice. At the same time, the arrangement has a sunset clause of 16 years, and the three nations can either renegotiate after six years or discuss an extension.
Proponents aver this allows North America to adapt to evolving market economies. Critics argue that USMCA could be used as a political football and bargaining chip from election to election.
Tariffs on steel and aluminum will still be there, but the new deal has some updates, including the origin rule. Under NAFTA, 62.5% of automobile components had to be created in Mexico, the United States, or Canada to avoid tariffs. USMCA revises this figure to 75%, aiming to boost the countries’ respective manufacturing capabilities and expand the automotive workforce.
One of the most protected cartels in the world is Canada’s dairy market. Thanks to supply management and domestic quotas that shield farmers from foreign competition, Canadian consumers pay more for a carton of milk. The USMCA somewhat adjusts the system. The agreement allows U.S. dairy farmers to export up to 3.6% of Canada’s dairy market, nearly quadruple that in NAFTA.
Central Planning Is Here to Stay
When USMCA goes into law, will there be a remarkable difference in the U.S., Canadian, and Mexican economies? You might notice minuscule changes over the long haul, but nearly everything will stay the same. For those who lament on centrally planning trade, the USMCA is only a slight improvement from NAFTA. For those who need to score political points, the USMCA is one of the biggest developments to happen so far in this century. As the agreement’s contents become more available, you will inevitably discover some cronyist mechanisms, leftist causes du jour, and globalist ingredients in the same context as the Trans-Pacific Partnership (TPP).
President Trump and the Democrats will make a big deal out of this news. Trump will campaign on fulfilling his promise to scrap the “worst deal” in U.S. history, while his 2020 opponent will crow that the Democrats ensured a better deal for America. Much to the chagrin of Republicans and Democrats, they would both be right.
So, now, about China…
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