Trump’s New Nafta Faces Mounting Resistance in Democratic House

Pelosi and other leaders signal they won’t allow a vote without certain changes to labor rules

 

President Trump’s push to revamp North America’s trade rules is hitting a roadblock in Washington as Democrats and labor groups demand changes, dimming its chances of passage before next year’s presidential election.

As Congress returns from recess this week with a full plate of priorities, House Speaker Nancy Pelosi (D., Calif.) and other prominent Democrats have signaled they won’t allow a vote on the administration’s new agreement with Canada and Mexico without certain changes.

Democrats said they want to make it easier to enforce new rules designed to strengthen labor rights in Mexico, saying a lack of worker protections there is hurting wages and job prospects for U.S. workers. Trump administration officials said these concerns can be handled in follow-up legislation that would implement the U.S.-Mexico-Canada-Agreement, or USMCA.

The deal must still be ratified by all three countries, and there is no deadline for that to happen. But with the U.S. election season approaching, some Republicans and trade experts said Democrats may be seeking in part to deny Mr. Trump a political win—or at least to exact a heavy price for advancing the deal.

“There are always political motives,” with lawmakers focused on who will get credit or blame on such a comprehensive trade overhaul, said Phil Cox, former executive director of the Republican Governors Association and current co-chairman of a bipartisan group seeking to build national support for USMCA.

How could the Democrats and the Trump administration resolve their differences over labor protections in the new Nafta? Join the conversation below.

nafta

The agreement has yet to get through the ratification process in Canada and Mexico, but it is the prospect of resistance in the U.S. that now stands as the biggest question mark, according to people following the talks.

In an interview with Canada’s Global Television Network on Sunday, Bank of Canada Gov. Stephen Poloz said business confidence in that country remains uncertain.

“We were watching for signs that people would react positively to the signing of USMCA. That seems to have fallen off a little bit lately because [of] the issue of ratification,” Mr. Poloz said.

Mr. Trump, a Republican, made revising the North American Free Trade Agreement, or Nafta, a central plank of his 2016 campaign. In the past, he has threatened to pull the U.S. out of the original deal, and some trade experts said he could renew those threats. For now, however, the administration appears focused on promoting the benefits of the new Nafta, which Vice President Mike Pence pushed at appearances in the auto industry stronghold of Michigan last week.

“The USMCA will actually impact more than two million American manufacturing jobs that depend on exports to Canada and Mexico,” Mr. Pence said. “It’s absolutely essential because the USMCA will finally give workers the level playing field and be able to compete and win on a global stage as never before.”

Mrs. Pelosi and other Democrats who voted for Nafta in 1993 believe its labor provisions weren’t effective and they want to make sure the U.S. has special tools to ensure enforcement under USMCA, congressional aides said.

USMCA includes provisions that labor unions requested, such as a rule requiring an increased share of automotive content to be produced in high-wage factories. But some Democrats said the agreement doesn’t give the U.S. the needed enforcement tools.

Democrats said they have long been focused on raising labor standards in Mexico, meant to raise wages for workers there and reduce the incentive for U.S. firms to move production to Mexico.

“Reflecting on the history of our concerns with Nafta, we question whether there is reason to believe that the new agreement will lead to meaningful change and real improvements for labor standards in Mexico,” House Democrats, led by Rep. Richard Neal of Massachusetts, chairman of the Ways and Means Committee, wrote in a letter to U.S. Trade Representative Robert Lighthizer this month.

Some Republicans, meanwhile, are pushing for the removal of steel and aluminum tariffs imposed on Canada and Mexico. In an opinion article published in The Wall Street Journal on Sunday, Senate Finance Committee Chairman Chuck Grassley (R., Iowa) said those tariffs are a “significant roadblock” to approval of USMCA.

The White House had hoped to reach a deal on the revised Nafta and push it through Congress in 2017, when the Senate and House were both under Republican control. But Mr. Lighthizer wasn’t able to strike a deal with both Mexico and Canada until a few weeks before the 2018 elections, which shifted House control to the Democrats. Free-trade agreements require majority support in the House and Senate.

In recent weeks, Sens. Ron Wyden of Oregon and Sherrod Brown of Ohio, both Democrats, have made a labor-enforcement proposal that has been welcomed by House Democrats, aides said. U.S. and Mexican officials would together audit and inspect facilities suspected of breaching labor standards in USMCA, and the U.S. would be allowed to reinstate tariffs on goods from factories in violation.

Mexican Ambassador Martha Bárcena said last week that she discussed the proposal with Mr. Brown but would insist any labor changes works the same way for all three countries. “I said, ‘Perfect, senator, we agree: Will assume the U.S. will receive a team of labor inspectors from Mexico to see if tomato farmers in Florida are complying.’ ”

Why New Nafta's Approval Faces Long Odds
Vice President Mike Pence was in Michigan on Wednesday to sell the virtues of the new Nafta, or the U.S.-Mexico-Canada Agreement. But is Congress ever going to approve the agreement? WSJ's Gerald F. Seib explains. Photo: Getty

A spokeswoman for Mr. Brown said he is “absolutely open to the provision being bilateral, and he looks forward to continued work with both administrations.”

In general, Mexico is reluctant to reopen USMCA to changes, fearing a “Pandora’s box” of demands from businesses and interest groups in all three countries, Ms. Bárcena said at a Georgetown University Law Center conference.

The Trump administration also has sought to avoid changes to USMCA. Instead, Trump officials have told Congress the U.S. could use domestic law—including the tariff provision known as Section 301—to penalize Mexico for any labor violations.

A spokesman for Mr. Lighthizer declined to comment on the push to make changes on labor enforcement.

Labor leaders and allied Democrats worry the changes won’t be effective unless they have the agreement of Canada and Mexico. Asked by The Wall Street Journal about USMCA’s prospects in Congress this year, AFL-CIO President Richard Trumka said he could guarantee it won’t pass without changes to the underlying international deal.

The 2020 presidential election could further drive Democratic opposition to the trade deal. In 2016, opposition from candidates and party activists was so strong that Hillary Clinton dropped her support for the Trans-Pacific Partnership deal that President Obama had negotiated.

Democratic presidential candidates Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, who are also sitting senators, have said they would oppose the deal unless it is renegotiated with stronger environmental protections and with changes to intellectual-property rules that, they said, are too favorable to the pharmaceutical industry.

Mr. Trump has strong support in the business community and farm groups for USMCA. A report from the bipartisan U.S. International Trade Commission said USMCA would result in 29,700 new U.S. jobs in engine and transmission production, while car-assembly jobs would likely fall slightly. Detroit auto makers back passage of the deal and expect assembly jobs to increase.

Meanwhile, Mexico is working to pass a labor-law overhaul mandated by USMCA. That move could assuage some Democratic concerns as the U.S. Congress returns this week from a recess and looks toward holding hearings on USMCA.

Is Trump's New Nafta in Trouble?
The Trump administration negotiated the USMCA trade deal as a replacement to Nafta. Will President Trump's new deal be ratified in the near future, or are there roadblocks ahead? WSJ's Gerald F. Seib explains. Photo: Getty

Under trade law known as “fast track,” Mr. Trump could submit USMCA to the House and Senate for an up-or-down vote with no amendments allowed. Still, in 2008 Mrs. Pelosi changed House rules to prevent such a vote on a free-trade agreement with Colombia, and aides said she likely would do that again if the Trump administration doesn’t address Democratic concerns on USMCA.

Threats by Mr. Trump to withdraw from Nafta could lead to a deal on USMCA with the Democrats, former officials say, but such tactics could also threaten the very existence of North America’s free-trade zone.

“I take the president at his word,” said Mr. Cox, the Republican political operative. “He said he’ll tear it up.”

—Paul Vieira and Josh Zumbrun contributed to this article.
Write to William Mauldin at [email protected]


Trump’s Tariffs End or His Trade Deal Dies
Congress won’t approve USMCA while constituents pay the price for Mexican and Canadian retaliation.
By Chuck Grassley
https://www.wsj.com/articles/trumps-tariffs-end-or-his-trade-deal-dies-11556479697?mod=searchresults&page=1&pos=3
April 28, 2019

Donald Trump bucked decades of Republican orthodoxy by railing against free-trade agreements. To say I was skeptical of his plans to rip up or renegotiate nearly every major trade deal would be a polite understatement.

I’ve represented Iowa in the Senate for nearly 40 years and have been a family farmer my entire life. I know how important trade agreements are to our country’s farmers. That’s especially true of the North American Free Trade Agreement. Since its passage in 1994, agricultural exports to Canada and Mexico have more than quadrupled. Corn exports increased sevenfold.

Access to global markets is vital for many other industries as well. A Business Roundtable study finds international trade supports 39 million jobs across America, 12 million from trade with Mexico and Canada alone.

But I admit Mr. Trump was on to something. He is the first president to take on China’s abuses seriously, from theft of U.S. intellectual property and forced technology transfers to anticompetitive subsidies. He’s opened Argentina’s market to U.S. pork for the first time since 1992. A new deal with Japan could happen by year’s end.

Most notably, he successfully negotiated the successor to Nafta, the U.S.-Mexico-Canada Agreement. American farmers, workers and businesses stand to benefit from USMCA. More market access for agriculture, new commitments in critical areas such as customs, digital trade and intellectual property, and the lowering of non-tariff barriers will translate into more jobs, higher wages and greater productivity. The U.S. International Trade Commission, an independent agency, estimates USMCA’s benefit for economic growth to be even larger than its estimate of the effect had the U.S entered the Trans-Pacific Partnership. That’s saying something, particularly when we already have zero tariffs under Nafta.

But the job isn’t done. The Constitution assigns Congress the task of regulating foreign commerce. The House and Senate must pass legislation implementing USMCA. As chairman of the Finance Committee, I’m leading the Senate effort. I’ve been involved in the passage of every U.S. free-trade agreement, and it’s never easy. Reorganizing a massive economic relationship affects many constituencies, and that’s inevitably complicated.

I’ve met with congressional colleagues, as well as U.S., Canadian and Mexican trade officials, to discuss how our nations will secure legislative approval of USMCA. A significant roadblock is the administration’s tariffs on steel and aluminum and retaliatory Canadian and Mexican tariffs on U.S. products. These levies are a tax on Americans, and they jeopardize USMCA’s prospects of passage in the Mexican Congress, Canadian Parliament and U.S. Congress. Canadian and Mexican trade officials may be more delicate in their language, but they’re diplomats. I’m not. If these tariffs aren’t lifted, USMCA is dead. There is no appetite in Congress to debate USMCA with these tariffs in place.

Many Americans have been harmed by retaliatory tariffs. Mexican tariffs on U.S. pork, to take one example, have lowered the value of live hogs by $12 an animal. Iowa is the top pork-producing state in the country. That means jobs, wages and communities are hurt every day these tariffs continue—as I hear directly from Iowans. It’s time for the tariffs to go.

Earlier this year U.S. Trade Representative Robert Lighthizer told the House Ways and Means Committee that failing to pass USMCA this year would damage the credibility of America’s global trade agenda, particularly the efforts to secure a deal with China. He’s right.

The administration can take the lead by promptly lifting tariffs on steel and aluminum from Canada and Mexico and working with allies to address the true source of overcapacity: China. This essential step is fully within the administration’s control and would immediately clear a significant hurdle to passage. Meanwhile, Speaker Nancy Pelosi and congressional Democrats should recognize this historic win for the country and engage in good faith to pass USMCA this year.

USMCA is good for the environment, for workers, for jobs and for nearly every sector of America’s economy. I hope Washington rises to the occasion.

Mr. Grassley, an Iowa Republican, is the U.S. Senate’s president pro tempore and chairman of the Finance Committee.

 

Published in the Wall Street Journal, read more here 

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