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Report on Business Congress, White House on collision course over efforts to ratify U.S.-Mexico-Canada trade agreement

U.S. President Donald Trump, Canada's Prime Minister Justin Trudeau and Mexico's President Enrique Pena Nieto sign documents during the USMCA signing ceremony before the G20 leaders summit in Buenos Aires, Argentina Nov. 30, 2018.

KEVIN LAMARQUE/Reuters

U.S. Congress is on a collision course with President Donald Trump over the U.S.-Mexico-Canada agreement (USMCA), putting ratification of the trade deal at risk of being indefinitely delayed or flying completely off the rails.

Democrats are demanding trade negotiations be reopened to change labour, environmental and pharmaceutical provisions, even as the Trump administration, Canada and Mexico say they will not revisit the terms of the pact.

Efforts to have Mr. Trump lift steel and aluminium tariffs on Canada and Mexico, meanwhile, are also stalled. Canada, Mexico and some members of Congress have said they will not ratify USMCA until the tariffs are gone, but the White House has refused to budge.

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The immediate risk of a failure to implement the deal is prolonged uncertainty for businesses in one of the world’s largest free-trade zones. A longer-term risk is that Mr. Trump takes drastic action, such as withdrawing from NAFTA entirely, if the standoff continues.

At the same time, Canada faces a time crunch. Parliament will rise in June and not reconvene until after the October election, meaning ratification could be delayed by months if it does not happen soon.

House of Representatives Speaker Nancy Pelosi, the top congressional Democrat, warned this week that USMCA would have to be reopened to satisfy her party’s demands for changes. The Democrats want tougher labour standards, primarily in Mexico, as well as stronger methods to punish the country if it fails to enforce the new standards.

“We’re saying that enforcement has to be in the treaty, not in the implementing legislation,” she said at an event hosted by news website Politico. “No enforcement, no treaty.”

Canada’s envoy to the United States, however, said Ottawa would not agree to reopen the finished USMCA. Even though the Trudeau government agrees with Democratic ideals on labour, the environment and pharmaceuticals, it fears prolonging uncertainty by going back into talks.

“A deal’s a deal and we’re not going to reopen, because once you do that, who knows where that goes,” Ambassador David MacNaughton said Tuesday after meeting at the U.S. Capitol with the New Democrat Coalition, a group of moderate legislators. “The agreement isn’t perfect, but we think it’s a good agreement.”

One U.S. administration source said the Trump administration also does not want to reopen the deal out of fear that doing so would result in Mexico asking for further changes to the text, particularly given that Mexico now has a different president from the one who signed off on the pact. The source, who was not authorized to speak publicly about the administration’s thinking, said the administration was even reluctant to negotiate side letters to the deal.

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‘We’ve done our deal.' Canada won’t reopen USMCA trade talks as U.S. Democrats put pressure on Mexico, Freeland says

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U.S. Trade Representative Robert Lighthizer met Tuesday with a group of freshmen Democrats at the Capitol to brief them on USMCA. Legislators said afterward that most of the session focused on prescription drugs: Democrats want to reverse USMCA provisions that force Canada and Mexico to impose tougher patent protections to benefit large pharmaceutical companies. The party is pushing a plan to allow Americans to buy cheaper Canadian generic drugs, which would be undermined if Canada’s drug prices rise as a result of the tougher patent protections.

Representative Susan Wild of Pennsylvania said the meeting was “contentious” and that Mr. Lighthizer insisted the pharmaceutical provisions were “non-negotiable.”

“I have not made a decision either way [on whether to vote for the deal], but I was not impressed by anything I heard here,” she said.

One Canadian official, speaking on condition of anonymity, said it might be possible to circumvent demands for renegotiation by putting together a coalition of Republicans and moderate, pro-business Democrats willing to pass the deal without making changes. The official, however, said it was unlikely Mr. Trump could get ratification done before Congress’s August recess. Two U.S. congressional sources involved in the file said there was no clear timeline for moving forward on ratification.

Some Democrats said their concerns could be addressed without reopening talks. On the labour front, for instance, Mexico is in the middle of implementing new workers’ rights legislation that is meant to help independent trade unions.

Bill Pascrell, a pro-union Democrat from New Jersey, said if the United States could get a separate agreement with Mexico to ensure its labour laws are sufficiently tough and properly enforced, it might not be necessary to reopen USMCA. “As I understand it, we don’t have to reinvent the wheel,” he said.

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The New Democrat Coalition was similarly optimistic.

“There are ways of accomplishing these same objectives without having to open up the entire agreement, because things can get pretty dicey pretty quickly if you just start to open up and renegotiate and then it suddenly becomes a free-for-all,” said Ron Kind of Wisconsin.

Mr. Kind said the New Democrats were also determined to see steel and aluminium tariffs lifted before they would consider USMCA: “[This] has to get resolved for USMCA to move forward.”

So far, however, the push to lift tariffs has gone nowhere. While Canada has repeatedly lobbied the United States to remove them in recent months, the two sides have not held detailed negotiations on the file. Canada and Mexico have quietly co-ordinated: Foreign Minister Chrystia Freeland compared notes on tariffs and USMCA ratification with Mexican Economy Minister Graciela Marquez in a telephone call last month, one Canadian official said.

Joe Comartin, Ottawa’s consul-general in Detroit, said there is growing “frustration” on the Canadian side that both tariffs and ratification are caught in Washington’s political gridlock.

“We’re at a stalemate with both sides, the Democrats and the Republican administration, just digging in their heels,” he said in an interview last week between meetings with lawmakers on Capitol Hill. “There’s a real risk that, in spite of all the work that’s gone into these negotiations, that because of the rigidity of the partisan positions on both sides, there’s just no movement at all.”

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