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USMCA aka NAFTA2 still awaits Congress

Oh, the drama behind the ratification of the United States-Mexico-Canada Agreement, generally referred to as the North American Free Trade Agreement 2. Negotiators from all three countries spent a considerable amount of time renegotiating NAFTA, and ratification or rejection of the revised agreement should be coming soon.

Then-President Enrique Peña Nieto of Mexico, U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau signed the United States-Mexico-Canada Agreement on Nov. 30, 2018, in Buenos Aires, Argentina. The deal is still pending in the U.S. Congress. (Associated Press)

Mexico ratified the agreement on June 19 by virtue of its passage in the Mexican Senate. The Mexican government realized how much it needed the agreement to pass. There continue to be concerns about Mexico’s indigenous and most vulnerable populations not benefiting from the agreement. There are also concerns about the influence of U.S. and Canadian multinational corporations and their effect on Mexico’s economy and environment. However, these concerns pale in comparison to the need for Mexico to have a strong trade relationship with its two North American partners.

In Canada, Justin Trudeau won reelection, and it appears that his government will continue down the road to ratification. Canada has been taking the approach that it will parallel U.S. progress on ratification. Therefore, until the U.S. House of Representatives begins debate and eventually opens up the agreement for vote, it appears that Canada will continue observing the developments on this matter in the U.S. This puts the U.S. in the driver’s seat to move the agreement forward.

The USMCA was negotiated using Trade Promotion Authority (TPA), which lays forth the procedure in which the Executive Branch and Congress work together on negotiating and ratifying agreements. Under TPA, the President is allowed to negotiate an agreement such as the USMCA, while consulting with Congress during the process. The agreement is then finalized and sent to Congress for review. Congress then either votes yes or no on the agreement. TPA affords assurance to foreign governments negotiating trade agreements with the U.S. that they will not have to negotiate with the Executive Branch and the more than 500 members of Congress separately. This allows a streamlined process in getting a trade agreement passed.

And the USMCA is a trade agreement, not a treaty, which would have to be passed by two-thirds of the Senate. Rather, the House of Representatives first votes on the agreement, as the U.S. Constitution mandates that all legislation with a potential impact on federal revenues be initially considered by this chamber. If passed in the House, the agreement will go to the Senate for final approval. A simple majority in each chamber is needed for passage. Therefore, support in the House of Representatives will either make or break the USMCA, and its passage will depend heavily on the support of Speaker Nancy Pelosi.

There are major concerns among some Democratic House members about certain parts of the USMCA. These include labor, environmental, enforcement mechanisms, and the favoring of large pharmaceutical companies over the best interest of their customers. To address these concerns, Speaker Pelosi has formed House committees to study these areas, in order to provide insight ahead of the upcoming vote.

If these concerns are not adequately addressed and put to rest, there is an inherent danger that some House Democrats will want the negotiations reopened. This will cause the USMCA to go back to the drawing board, because it faces an up or down vote and cannot be amended once it is on the floor of the House. Mexico and Canada have already stated that they are strongly against sending the agreement back for renegotiation. In Mexico’s case, it has already ratified the agreement as written.

Despite all of the vitriol within Congress and at the Executive Branch, passage of the USMCA could ironically provide an opportunity for Democrats and Republicans to work together on an issue of national importance. Both Democrats and Republicans represent huge agricultural concerns that need the USMCA ratified. Mexico is a major importer of U.S. crops such as corn and soybeans. Both parties also represent large and small corporations that drive exports to our North American neighbors.

NAFTA was initially created by Republican President George Bush, and then implemented by Democratic President Bill Clinton, not exactly political friends or allies. NAFTA was passed because it makes sense in keeping North America competitive with the rest of the world. It has fostered symbiotic relationships and the integration of our three North American economies. Trade among the three NAFTA partners has quadrupled since its inception in 1994. Not ratifying the renegotiated NAFTA is a threat that can disrupt our economies, decrease productivity, and make us less competitive in the global market. Its smooth ratification in the U.S. Congress can demonstrate to Americans and to the world that our lawmakers can still put aside deep-rooted differences and come together for the good of our nation and our neighbors.

Jerry Pacheco is the executive director of the International Business Accelerator, a nonprofit trade counseling program of the New Mexico Small Business Development Centers Network. He can be reached at 575-589-2200 or at jerry@nmiba.com.

 

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