US legislators approve United States-Mexico-Canada trade deal

The United States House of Representatives overwhelmingly approved a new North American trade deal on Thursday that includes tougher labour and automotive content rules but leaves $1.2 trillion in annual US-Mexico-Canada trade flows mostly unchanged.

The US House passed legislation to implement the US-Mexico–Canada Agreement (USMCA) 385-41, with 38 Democrats, two Republicans, and one independent member voting “no”.

The bipartisan vote contrasted sharply with Wednesday night’s Democrat-only vote to impeach US President Donald Trump.

The House vote sends the measure to the Senate, but it is unclear when the Republican-controlled chamber will take it up. Senate Republican leader Mitch McConnell has said that consideration of the measure would likely follow an impeachment trial in the Senate, expected in January.

The USMCA trade pact, first agreed upon in September 2018, will replace the 1994 North American Free Trade Agreement. Trump pledged for years to quit or renegotiate NAFTA, which he blames for the loss of millions of US factory jobs to lower-wage Mexico.

House Speaker Nancy Pelosi gave USMCA a green light last week after striking a deal with the Trump administration, Canada, and Mexico to strengthen labour enforcement provisions and eliminate some drug patent protections.

Pelosi said she was not concerned about Democrats handing Trump a political victory on USMCA as they are trying to remove him from office.

“It would be a collateral benefit if we can come together to support America’s working families, and if the president wants to take credit, so be it,” Pelosi said during House floor debate before the vote.

Concessions for Democrats

The changes negotiated by Democrats, which include tighter environmental rules, will also set up a mechanism to quickly investigate labour rights abuses at Mexican factories. They have earned the support of several US labour unions that have opposed NAFTA for decades.
US Trade Representative Robert Lighthizer made a concession by dropping a requirement for 10 years of data exclusivity for biologic drugs, a provision that Democrats feared would keep drug prices high and that they called a “giveaway” to big drugmakers.

Some of the most ardent trade sceptics in Congress have voiced support of the deal, including Representative Debbie Dingell, who represents an autoworker-heavy district in southeastern Michigan. Dingell said in television interviews that she backed the bill, even though she was sceptical it would bring carmaking jobs back to Michigan. Representative Ron Kind, a pro-trade Democrat from Wisconsin, one of the top dairy-producing states, praised new access to Canada’s closed dairy market under USMCA.

“A ‘no’ vote is a return to the failed policy of the old NAFTA, the status quo, rather than this more modernized version,” Kind said in floor debate.

Cars, digital, currency

The agreement modernizes NAFTA, adding language that preserves the US model for internet, digital services, and e-commerce development, industries that did not exist when NAFTA was negotiated in the early 1990s. It eliminates some food safety barriers to US farm products and contains language prohibiting currency manipulation for the first time in a trade agreement.

But the biggest changes require increased North American content in cars and trucks built in the region, to 75 percent from 62.5 pecent in NAFTA, with new mandates to use North American steel and aluminium.

In addition, 40 to 45 percent of vehicle content must come from high-wage areas paying more than $16 an hour – namely the United States and Canada. Some vehicles assembled in Mexico, mainly with components from Mexico and outside the region, may not qualify for US tariff-free access.

The US Congressional Budget Office estimated earlier this week that automakers will pay nearly three billion dollars more in tariffs over the next decade for cars and parts that will not meet the higher regional content rules.