Road to USMCA Ratification: Is the End in Sight?
September 5, 2019
With Congress back in session after its summer recess and national election cycles picking up, ratification of the United States-Mexico-Canada Agreement (USMCA) remains in limbo in both the U.S. and Canada. In the Democrat-controlled U.S. House of Representatives, several roadblocks still remain before House Speaker Nancy Pelosi will agree to bring the agreement to vote. Staff from the Office of U.S. Trade Representative and Congress spent much of the summer negotiating and exchanging proposals on those sticking points, but major compromises have yet to be announced. Additionally, the upcoming Canadian federal elections in October have stymied progress on passage in Canadian Parliament. These delays continue to threaten passage of the president’s signature trade agreement.
Q1: What is the current status of the USMCA in the three countries?
A1: After the initial signing ceremony on November 30, 2018, the United States-Mexico-Canada Agreement (USMCA) faced three individual hurdles—ratification by the respective legislatures of each country in the agreement. Mexico became the first country to ratify the agreement on June 19, 2019, when the Mexican Senate voted 114 to 4 to do so. That margin of support was possible in Mexico due to the importance of its trade relationship with the United States and the relative lack of politicization of the USMCA in Mexico.
The path for USMCA has been trickier in the United States and Canada. The Trump administration is focused on passing the USMCA in the coming months. Vice President Mike Pence has given speeches in support of the agreement across the country; U.S. Trade Representative Robert Lighthizer has met with Democrats in hopes of resolving their concerns over the agreement; and President Trump has called on Congress to pass the USMCA multiple times this summer. Democrats in Congress, however, have outstanding concerns with the text of the agreement that they claim must be resolved before a vote on the deal. Despite wanting to approve the agreement sooner rather than later, the office of the U.S. Trade Representative (USTR) and the White House acknowledge that House Speaker Nancy Pelosi (D-CA) will have the final decision on when the agreement is brought to a vote. The longer a vote is delayed, though, the more likely it is that the USMCA falls victim to 2020 election politics and becomes a difficult issue for Democrats.
In Canada, ratification of the USMCA isn’t as contentious but still has not yet happened. The bill was introduced in the Canadian parliament in May, but Canada has maintained that it will move its ratification process in tandem with the United States. However, the window for ratification gets narrower as the Canadian federal election approaches on October 21, 2019. If the United States cannot move quickly enough and Canada is not able to ratify the USMCA by September 15, the agreement will have to be reintroduced in the next parliament, which may be led by a new prime minister and governing coalition.
In the event that the Conservative Party of Canada wins the election, prospects for ratification in Canada remain hopeful but not completely clear. Andrew Scheer, leader of the Conservative Party, slammed the deal in a speech before the Canadian parliament, calling Prime Minister Justin Trudeau’s renegotiation of the North American Free Trade Agreement (NAFTA) a “failure.” In a major foreign policy speech in Montreal, Scheer said the new provisions left Canada with a “worse deal on NAFTA.” Despite those attacks, the Conservative Party has not indicated whether it will ratify the USMCA (or CUSMA in Canada) as is or seek to renegotiate aspects of it, but reports show that it will likely support the agreement overall.
Q2: What remaining hurdles are there in the United States to the USMCA?
A2: In part II of this series we detailed Democrats’ four concerns with the USMCA: that the deal lacks strong labor protections, that it lacks strong environmental protections, that it advances the interests of brand-name pharmaceutical companies at the expense of patients, and that its enforcement mechanism is too weak. To this end, Speaker Pelosi has organized House Democrats into working groups in each area to negotiate with the administration over how to address those concerns. Of the four core concerns, the only one that has seen some public progress is the labor provisions issue. Work on the other three issues continues behind closed doors, and there have not been any major public statements on them.
On labor, the concern is specifically focused on Mexico. Critics of NAFTA argue that lower Mexican labor standards combined with liberalized trade led U.S. companies to move operations to Mexico and hire lower-cost labor at the expense of U.S. jobs. Those critics say NAFTA’s fatal flaw was its lack of enforceable labor rules in the core NAFTA agreement. Democrats’ concerns with the USMCA are similar: although the labor rules in the USMCA are in the core of the agreement and are enforceable, they are not strong enough to ensure workers in Mexico are afforded rights similar to those afforded to U.S. workers. The Mexican congress enacted labor reforms in April to allay some concerns and bring Mexican law into conformance with its USMCA obligations; however, Democrats are closely watching how quickly and aggressively the new law is implemented.
Overall, Democrats claim that addressing their concerns will require changes to the USMCA text. In practice that would require reopening the agreement already approved by one nation and signed by the other two. Representative Earl Blumenauer (D-OR), chairman of the House Ways and Means Subcommittee on Trade and a key player in the negotiations with the administration, said he was not overly concerned about revising the text and pointed out that the last several trade agreements the United States signed have been reopened. Mexico and Canada are both disinterested in renegotiating aspects of the agreement, with Canadian foreign minister Chrystia Freeland calling the idea “opening up what could really be a Pandora’s box.”
Q3: What is being done to address Democrats’ concerns?
A3: U.S. Trade Representative Robert Lighthizer has demonstrated an eagerness to work with Democrats, and the White House accepted that the USMCA needs Democratic support. House Democrats have had several meetings with the USTR over the last few months to hash out their differences, but progress is slow. At the end of July, House Democrats sent the USTR detailed proposals on how to resolve their concerns and are expecting a USTR counteroffer. Representative Blumenauer said at the end of July that “In the course of the last two months, we have seen significant progress. . . .” Exact details of each side’s positions and any final compromises are not yet known.
Q4: When will the USMCA be approved?
A4: Although Congress in now in recess, Democrat staffers and USTR officials continue to work on their respective proposals and drafts. White House economic adviser Larry Kudlow said the administration is aiming to submit the USMCA implementing legislation in September, but House Democrats say they will only move forward with ratification when they feel the administration has addressed their concerns. While the administration has placed pressure on Speaker Pelosi to allow a vote, Congressional Republicans like Senator Chuck Grassley (R-IA), chairman of the Senate Finance Committee, warned the White House “It’s very necessary that the president hold his patience because nothing is going to happen if Pelosi doesn’t want it to happen . . .,”a likely reference to Speaker Pelosi’s ability to strip fast-track procedures from applying to the implementing legislation and thereby delay it indefinitely.
While the administration may submit the implementing bill in September, Canada’s election makes the approval timetable there uncertain. Democrats suggest mid-fall is a more likely timeline for legislative action. But the longer negotiations between the administration and Democrats drag on, the more likely the USMCA will be caught up in the 2020 election. The prevailing view is that if it is not voted on by the end of 2019, it will not likely be taken up until after the 2020 election, almost a year later.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jack Caporal is an associate fellow with the CSIS Scholl Chair in International Business. Jonathan Robison is a program coordinator and research assistant for the CSIS Scholl Chair. Beverly Lobo is a former intern with the CSIS Scholl Chair.
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