Democrats signal concerns on NAFTA replacement

Posted at 5:21 AM, Nov 15, 2018
and last updated 2018-11-15 12:22:09-05

President Donald Trump is set to formally sign a replacement for the North American Free Trade Agreement in just two weeks — but the Republican loss of the House in the midterms means he’ll need Democratic support to get the deal through Congress next year.

Administration officials have expressed optimism they’ll be able to get Democrats on board, but comments from senior party figures at a hearing Thursday on the new trade deal suggested it will be an uphill battle.

“There are certainly some improvements in the USMCA over the previous NAFTA, but the jury is still out as to whether this deal meets my standard for a better deal for American workers,” said New Jersey Rep. Bill Pascrell, currently the senior Democrat on the House Ways and Means subcommittee on trade.

He called on the International Trade Commission to determine whether it will bring back jobs, boost wages and cut the trade deficit with Canada and Mexico — as the Trump administration has promised.

“As claims start to be made about the miracles that the new NAFTA will bring, we are relying on you, this commission, the International Trade Commission, to tell it like it really is,” he said.

His comments came at the start of a two-day hearing scheduled for Thursday and Friday by the ITC in Washington. The gathering offers a roadmap to issues lawmakers will consider, including the impact of the renegotiated deal on agriculture, industry and data privacy.

Representatives from auto, agriculture, tech and retail, as well as labor and environmental advocacy groups, are scheduled to testify. Along with Pascrell, Michigan Rep. Sander Levin spoke early Monday.

Levin, who is retiring from Congress at the end of the year, argued that the changes made by the USMCA won’t address the failure of the current NAFTA to require labor reform in Mexico, which he said has been the cause of job losses in the United States under the deal.

“Failure to rectify the basic flaw in and the major source of controversy over NAFTA 25 years ago will jeopardize support from the new House Democratic majority,” Levin said.

Trump and his counterparts Prime Minister Justin Trudeau of Canada and President Enrique Peña Nieto of Mexico have agreed to sign the deal before December 1, when Mexican president-elect Andrés Manuel López Obrador takes office. It’s not yet clear exactly when or where the leaders plan to do the signing ceremony. All three are due to gather at the annual G20 world leaders summit in Argentina at the end of November.

The ITC will have until 105 days after the signing, or mid-March, to deliver its report to Congress on the new US-Mexico-Canada Agreement, known as USMCA. But there is no legislative deadline for ratification.

Some Democrats have been hesitant to throw their support behind the USMCA, which was first announced at the end of September. Massachusetts Democratic Rep. Richard Neal, who’s set to take over the House Ways in Means Committee next year, has said “the bar for supporting a new NAFTA will be high.”

“So much is unknown about what the Democrats want right now, but that will become more clear as the new members get sworn in,” said Welles Orr, senior international trade adviser at Miller and Chevalier, and a former Assistant US Trade Representative under President George H.W. Bush.

Trump’s own negotiators have expressed optimism that Democrats would get on board with the deal, in part due to improved labor standards and environmental protections that have been worked in.

“I think it’s going to pass. And I think it’s going to pass with a substantial majority,” US Trade Representative Robert Lighthizer said at Trump’s Rose Garden news conference announcing the deal.

The new trade agreement was precipitated by Trump’s decision to get rid of the original NAFTA, which he’s called the “worst trade deal” ever signed. Negotiators from all three countries began talks on updating it more than a year ago.

The draft deal, agreed in September, differs from the 1993 NAFTA deal in several key ways. With respect to labor and environmental standards, it requires that 40% to 45% of car and truck parts be made by workers earning at least $16 an hour. Also, Mexico has committed to recognize workers’ right to collectively bargain, and the three countries agreed to enforce rights recognized by the International Labor Organization.

The USMCA lists a number of issues that the three countries have committed to addressing, including over-fishing, illegal wildlife trade and logging.

Labor groups like the AFL-CIO and environmental groups like the Sierra Club have expressed concern about how those new standards will be enforced — and some Democrats agree.

“The enforcement is non-existent…You can have nice words but [if] there’s no way to enforce them, it doesn’t really do anything,” said Wisconsin Rep. Mark Pocan, chair of the Congressional Progressive Caucus, earlier this week at an AFL-CIO event.

Changes to enforcement could be made after the deal is signed, either in the legislative approval or in a side deal between the countries, Orr said. He added that he expects the deal to ultimately pass Congress.

“There will be fits and starts, but I bet they can find a way forward,” he said.

Former Republican Missouri Governor Matt Blunt, now president of the American Automotive Policy Council, said he was optimistic that the new agreement will “help maintain the competitiveness” of the industry. The group represents represents Fiat Chrysler, GM and Ford.

One of the most notable changes in the USMCA has to do with the way cars and trucks are manufactured. In order for a vehicle to be free from tariffs, more of its parts will have to be made in North America.

Blunt called the new rules of origin “workable.” But others from the auto industry said the new restriction is complex and would be costly to comply with.

“Automakers will need to invest in elaborate processes to ensure compliance with these rules,” said John Bozzella, president of the Association of Global Automakers.

But the companies remain concerned about the existing tariffs on foreign steel and aluminum, which Blunt said drives up the cost of producing in the United States by $400 per vehicle. Trump put the tariffs in place earlier this year, arguing that the domestic industries need to be protected in the interest of national security.

The auto industry is also concerned about Trump’s threat to impose new tariffs on imported cars and parts.

The tariffs “would have a profound negative effect on the entire industry and the US economy as a whole, wiping out the benefits the USMCA might generate,” Blunt said.

The USMCA included a side deal that exempts Canada and Mexico from any new tariffs the Untied States puts on autos in the future, as long as they import under a certain threshold.