Colin Robertson is vice-president and fellow, Canadian Global Affairs Institute
Can President Donald Trump do a deal with Congress on the new North American trade pact? The Trump administration will pressure Canada and Mexico to move on USMCA, but let’s wait and see if Mr. Trump can deliver Congress.
Trade accords are like plays in three acts. In the first act, the governments decide on their respective objectives and get formal – as required in the United States – or informal legislative approval. The second act is the negotiation, with the ups and downs of the successive rounds and then the end-game gives and takes that, in the case of the United States-Mexico-Canada agreement culminated in the three leaders’ signature last November.
Now comes the final act, USMCA’s legislative implementation. It’s no sure thing.
U.S. Trade Representative Robert Lighthizer and his team have been busy drafting legislation and briefing the House ways and means (where USMCA gets first consideration), and the Senate finance committees and their respective trade sub-committees. The International Trade Commission’s required USMCA economic assessment, delayed by the government shutdown, will likely show marginal economic gains beyond the current trade deal, the North American free-trade agreement.
The Trade Promotion Authority (TPA) gives Congress 90 legislative days to give USMCA up or down approval. Most Republicans will endorse the pact so Senate passage is likely. But passage won’t be easy with various Democratic contenders for 2020 campaigning against Mr. Trump.
A blatantly Trump label on USMCA would likely doom it in a polarized Congress. Should Mr. Trump follow through on his threat to rescind NAFTA and tell the Democrat to take it or leave it, the Democrats may do just that, taking a page from the obstructionist GOP playbook during the Obama administration.
House passage will depend on Speaker Nancy Pelosi and fellow Democrat committee chairs Richard Neal of Massachusetts and Oregon’s Earl Blumenauer and enough the 100-plus members in the centrist New Democratic Coalition. The progressive wing of the Democrat caucus wants changes. Can Mr. Lighthizer deliver enough of what members will want? Ironically, Mr. Lighthizer will point to the Canadian-inspired labour and environmental chapters with their enforcement provisions to secure Democrats’ votes
As usual, there are competing U.S. interests lobbying for and against USMCA’s passage. Canada and Mexico can play a supporting role in encouraging passage, but now it’s an American debate.
There will be he hiccups. We need to be prepared to reopen the deal if the Democrats insist. As Speaker in 2008, Ms. Pelosi upended the TPA forcing changes to President George W. Bush’s trade agreements with Peru, Colombia and Korea. And how would a U.S.-China deal affect passage?
Americans need to know, as Foreign Minister Chrystia Freeland said this week, that passage of USMCA in Canada and Mexico will depend on them rescinding the steel and aluminum tariffs. Imposed under ‘national security’ provisions, Ms. Freeland rightly asks why are they applied against the U.S.’s closest ally. Economic evidence says that while steel profits may be up, these tariffs are hurting Americans. The lumber tariffs add $9000 to the construction of an American house.
For most of the House and Senate committee members, whether Democrat or Republican, Canada and Mexico are the main export markets for their districts or states. Our diplomats need to drive home this fact pointing out the jobs created by our trade and investment.
Our embassy has state fact sheets and the Business Council of Canada created a nifty district-level map. Our legislators – federal and provincial, as well as business and labour – should draw on them in discussions with their counterparts. We can adjust our advocacy campaign, but we need to sustain its tempo.
Mexico needs to pass labour reform legislation. President Andres Manuel Lopez Obrador’s party now controls both chambers in the Mexican Congress and it will likely happen. But not while the tariffs are in place and any U.S. pressure to pay for Mr.Trump’s wall would back-fire.
Much of the new North American accord draws from the Comprehensive Economic and Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership that were negotiated by both the Harper and Trudeau governments. Canada’s fall election may intervene before parliamentarians consider the USMCA. Conservative Leader Andrew Scheer says he could have negotiated a better deal. He may get the chance but, if so, what would he change?
Until Mr. Trump delivers, Canada and Mexico should hold their own ratification efforts. While we should encourage congressional passage, our efforts need to focus on rescinding the steel, aluminum and lumber tariffs. For now, it is up to Mr. Trump and Congress. Let’s see him demonstrate his art of the deal.