1. Supporting Prosperity and Competitiveness by Approving the New USMCA
- Author:
- Earl Anthony Wayne
- Publication Date:
- 03-2019
- Content Type:
- Journal Article
- Journal:
- The Ambassador's Review
- Institution:
- Council of American Ambassadors
- Abstract:
- On November 30, the leaders of the United States, Canada and Mexico signed a new trade agreement to succeed the 1994 North American Free Trade Agreement. The United States-Mexico-Canada Agreement (USMCA) modernizes the 25-year-old NAFTA, but the legislatures in all three countries must still approve it.[1] The new USMCA will preserve the massive trading and shared-production networks that support millions of jobs in the U.S., Mexico and Canada and the ability of North America to compete effectively with China, Europe and other economic powers. Approving USMCA this year is very much in the national interests of all three countries given the $1.3 trillion in trade between them and the many businesses, workers and farmers that depend on the commerce and co-production that interlinks North America. These economic relationships also strengthen the rationale for maintaining strong political relationships among the three neighbors. There was widespread agreement to update NAFTA to reflect the changes in trade practices and in the three economies since 1994.[2] NAFTA does not cover Internet-based commerce, for example. Other areas required modernization, including trade in services, protection of intellectual property rights (IPR), environment and labor, which is a priority for U.S. unions.[3] Mexico, Canada and the U.S. tried to accomplish this NAFTA update with negotiation of the Trans-Pacific Partnership (TPP) agreement, but in January 2017 President Donald Trump pulled out of TPP, preferring to renegotiate NAFTA.[4] Approval of USMCA by the U.S. Congress remains uncertain. A number of Democrats are asking for stronger enforcement commitment particularly regarding labor. Others express concern that USMCA provisions may keep some prescription medical costs high.[5] Business and agricultural associations are urging approval of USMCA because it will provide certainty to continue the cross-continental collaboration that preserves vital intra-North American markets for manufacturing, agriculture and services and helps them out-perform global competitors. In response to democrat and union concerns, USMCA’s advocates argue that it includes significantly stronger labor provisions and enforcement.[6] Before the agreement moves ahead, however, the three countries must also find a solution to the tariffs the U.S. put on steel and aluminum from Canada and Mexico in 2018 for “national security” reasons. In response, those countries imposed equivalent tariffs on a range of U.S. exports, spreading economic pain across all three countries.[7] Mexico and Canada, as well as key members of Congress, want this problem resolved before approving USMCA.[8] The U.S. International Trade Commission must also assess USMCA’s economic impact. This report is due in mid-April. The administration must also propose implementation legislation (and guidelines) before Congress formally considers the agreement. Congress will then have a limited time to act on USMCA under existing legislation, but members of Congress could drag the process out.[9] The political window for U.S. congressional approval will close this year, however, given the 2020 U.S. elections.[10] President Trump, USTR Lighthizer and others have begun lobbying for approval, as have Mexico and Canada more quietly. The months ahead will thus be vital for trade and long-term relationships in North America and for the continent’s ability to weather well future international competition. Given the enormous economic benefits of approving USMCA, the U.S. Congress, the Administration and the non-government stakeholders should engage intensively to find ways to address concerns raised and find a “win-win” way to approval. Fortunately, the United States public increasingly views trade in North America as positive. According to the Chicago Council on Global Affairs, for example, those seeing NAFTA and now USMCA as “good” for the U.S. economy have grown significantly, rising from 53 percent in 2017 to 70 percent seeing USMCA as “good” this year. This is a solid foundation for rapid approval of USMCA.[11]
- Topic:
- Regional Cooperation, NAFTA, Trade, and USMCA
- Political Geography:
- United States, Canada, North America, and Mexico