In this file:
· New NAFTA deal 'in trouble', bruised by elections, tariff rows
· Knowledge gaps create opportunity for mischief among U.S. legislators as USMCA ratification stalls
New NAFTA deal 'in trouble', bruised by elections, tariff rows
Dave Graham & David Ljunggren, Reuters
April 7, 2019
MEXICO CITY/OTTAWA (Reuters) - More than six months after the United States, Mexico and Canada agreed a new deal to govern more than $1 trillion in regional trade, the chances of the countries ratifying the pact this year are receding.
The three countries struck the United States-Mexico-Canada agreement (USMCA) on Sept. 30, ending a year of difficult negotiations after U.S. President Donald Trump demanded the preceding trade pact be renegotiated or scrapped.
But the deal has not ended trade tensions in North America. If ratification is delayed much longer, it could become hostage to electoral politics.
The United States has its next presidential contest in 2020, and Canada holds a federal election in October.
The delay means businesses are still uncertain about the framework that will govern future investments in the region.
“The USMCA is in trouble,” said Andres Rozental, a former Mexican deputy foreign minister for North America.
Though he believed the deal would ultimately be approved, Rozental said opposition from U.S. Democrats and unions to labor provisions in the deal, as well as bickering over tariffs, made its passage in the next few months highly unlikely.
Canada’s Parliament must also ratify the treaty and officials say the timetable is very tight. Current legislators only have a few weeks work left before the start of the summer recess in June, and members of the new Parliament would have little chance to address ratification until 2020.
Trump, a Republican, has shown frustration with the Democratic-led U.S. House of Representatives for failing to sign off on the USMCA. He has threatened to pull out of the old pact, the North American Free Trade Agreement (NAFTA), if Congress does not hurry up.
If Trump did dump NAFTA, the three nations would revert to trade rules in place before it came into effect in 1994.
Knowledge gaps create opportunity for mischief among U.S. legislators as USMCA ratification stalls
Laura Dawson, Opinion, Special to The Globe and Mail (Canada)
April 7, 2019
Director of the Canada Institute at the Wilson Center in Washington
We are in the midst of the national ratification process for the NAFTA 2.0, known here in Washington as the United States-Mexico-Canada Agreement (USMCA). Right now, the outlook for ratification stands somewhere between imminent and never. I would put my money on the long game.
Trade-agreement ratification in Canada and Mexico is relatively straightforward. The processes can be completed in a matter of weeks so it can be ratified in Canada by the time Parliament rises in June. The U.S. process, by contrast, is highly complex. Trade-agreement authority is delegated by Congress to the president so when a negotiated text comes back to Congress, it takes its time to ensure that the executive branch got it right. Remember that the last time Nancy Pelosi was Speaker of the house (2007-2011), she refused to introduce new legislation for pending free-trade agreements with Colombia, South Korea and Central America. These deals were left to languish.
Even allowing for the possibility that today’s Democrats are more trade oriented, the U.S. process of mandatory consultation and review is onerous. Christopher Sands estimates that, once implementing legislation is introduced in Congress (and we have not yet even reached that point) it could take up to 50 weeks before final votes are taken in the House and Senate.
But it is not the procedural hurdles that have me worried. It is the knowledge gaps among new U.S. legislators about what the agreement covers and the opportunity for mischief that this lack of understanding creates. The issues that are most often raised as obstacles to ratification are enforceability of labour and environment provisions.
A key aspect of enforceability is dispute settlement. USMCA is much stronger than the North American free-trade agreement on this count because environment and labour disputes can now be heard by the same panels that adjudicate other trade disputes. However, the NAFTA panel system was never perfect. If there were no nationally nominated adjudicators available to serve on these panels, then the dispute settlement process stalled. The USMCA claims more robust mechanisms for appointing and retaining panelists. Time will tell.
But trade-agreement enforcement is not simply a matter of reliable mechanisms for settling disputes. It also involves monitoring and enforcement of commercial activities before they become disputes. The new rules of origin for automobiles significantly increase the compliance burden through new requirements for steel and aluminum content, regional value-added and minimum-wage rates. Legislators are right to ask whether these new rules are truly enforceable and, if so, how much compliance will raise the cost of buying a vehicle in North America.
Another consequential aspect of enforcement is that USMCA’s new labour agreement requires Mexico to make specific changes to its domestic laws regarding collective bargaining. While the Andres Manuel Lopez Obrador administration seems amenable to such changes, the passage of the new laws is proving to be quite complicated.
With the exception of the automotive rules there is not much in the USMCA that is truly unique. Most substantive measures are either updated text from NAFTA 1.0 or they were cut and paste from the Trans-Pacific Partnership – an agreement that all three parties had agreed to, if not ratified, and that the Democrats were proud to claim as their own under former president Barack Obama.
But any trade agreement, especially one so intimately tied to U.S. President Donald Trump’s battle with Mexico, is going to provide a highly visible platform for political gamesmanship. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) is a well-known player in this arena. On March 14, the AFL-CIO executive council released a statement demanding reforms to numerous chapters of the USMCA, many of them unrelated to labour including: