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Sept. 27, 2020

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Democrats, White House reach agreement on revised NAFTA trade pact

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WASHINGTON — After months of negotiations and a last-minute hitch involving Mexico, the White House and House Democrats have reached a deal that clears the way for passage of a revised North American free-trade pact.

“We got the agreement, we’re going to go with it,” House Ways and Means Committee chairman Rep. Richard Neal, D-Mass., said Tuesday.

The deal between House Speaker Nancy Pelosi, D-Calif., and President Donald Trump’s chief trade negotiator, Robert Lighthizer, came after intense talks with Mexico over Democrats’ demands for stronger labor enforcement rules, a major obstacle in advancing the long-stalled accord.

The agreement is expected to be officially announced later Tuesday.

Whether Congress has enough time to vote on the accord before the end of the year remains uncertain, but it’s now likely that Trump will be able to claim he has fulfilled a signature campaign promise before the 2020 election.

For Pelosi and other Democrats, who wanted to shape key elements of the trade agreement, ratifying the pact would provide a rare legislative accomplishment in a sharply divided Congress, allowing them to make a case to voters that they can legislate even during the impeachment inquiry into the president.

Trump and Republican lawmakers have repeatedly criticized Pelosi and her colleagues in recent weeks for not passing the revised North American Free Trade Agreement, newly named the United States-Mexico-Canada Agreement, or USMCA. Congressional Democrats argued that the revisions lacked sufficient enforcement terms to protect unions and workers’ rights in Mexico.

Many Democrats and labor groups blame NAFTA for a flight of production and jobs to Mexico, where wages are much lower and workers have had few organizing rights. Pelosi insisted she would not move the new trade deal forward without additional language on labor enforcement, as well as changes on market monopoly for certain drugs and stronger environmental protections.

While some Democrats were loath to do Trump any political favors, Pelosi faced pressure from moderates, including freshman lawmakers in her party, who have worried they could pay a price if Congress did not pass a trade pact with America’s two largest trading partners.

Trump hopes passage of the USMCA could help him with constituencies in the Midwest, where his trade war with China has hurt farmers and manufacturers.

As a candidate three years ago, Trump promised to overhaul trade policy. But he has had little to show for multiple tariffs and other extraordinary tactics he has used as he has aggressively sought concessions from trading partners.

Except for a small update to the U.S. trade pact with South Korea and a recent limited deal with Japan, he has been unable to win any deals.

In his campaign and since taking office, Trump has frequently denounced NAFTA as a disaster for U.S. industry and workers. And last fall, after more than a year of negotiations, Trump and the leaders of Canada and Mexico signed off on a revised trilateral pact.

The USMCA, while not a major overhaul of NAFTA, includes notable changes to rules governing production of automobiles and parts and resolving disputes between governments and private investors.

It also contains new or updated provisions on digital trade, financial services and other areas of commerce that were not major factors when NAFTA was ratified a quarter-century ago.

Tariffs in North America already were almost entirely removed by NAFTA, so the updated accord isn’t likely to have much impact on the pace of exports of U.S. farm goods to Mexico and Canada. At the same time, farmers have been unsettled by the trade war with China, and completing the North American trade agreement, they said, would reduce some of the worries about the future.

“It just causes uncertainty with the threat of companies wanting to look for other sources,” said Michelle Jones, who with her family farms wheat and barley in central Montana, and has been closely following the trade discussions from 2,000 miles away. Mexico is the largest export market for U.S. barley and also a big buyer of wheat.

Even though Trump and the heads of Canada and Mexico formally signed the proposed USMCA more than a year ago, it was only in the last few months that Lighthizer began negotiating with a working group of House Democrats. He went back and forth in an effort to reach a compromise on changes that Pelosi and her colleagues demanded, even as partisan rancor intensified in Washington over impeachment proceedings.

More recently Lighthizer stepped up the talks with Mexico. And throughout last week he and Mexico’s undersecretary for North America, Jesus Seade, were ensconced in meetings in Washington.

To ensure compliance, some House Democrats and labor groups had pressed to allow U.S. inspectors at Mexican plants and for the ability to block goods at the border for noncompliance with rules on collective bargaining and other workers’ rights.

U.S. and Mexican officials also wrangled over what kinds of steel would be allowed to meet the USMCA’s new requirement that 70% of the metal for car production be sourced in North America.

Mexican authorities and business owners have balked at the idea of U.S. inspectors in Mexican plants, calling it an infringement on their national sovereignty — always a sensitive issue in relations with their bigger American neighbor.

Last spring Mexico passed new labor law reforms under its populist leftist president, Andres Manuel Lopez Obrador, in large part to align with the revised trade accord.

Still, in a nation with relatively few independent unions — labor syndicates have long been allied with political parties or the government, and are notorious for siding with management — there is clearly a fear that the presence of U.S. labor inspectors could empower Mexican workers to start truly independent unions, and push for higher wages and other labor rights.

Moreover, sources monitoring the talks said that companies in Mexico, including multinationals, had pushed back on language that would allow shipments to be stopped at the border as a penalty if they failed to comply.

It wasn’t clear that Mexico had agreed to all the terms, but it appeared enough to have met Democrats’ demands for meaningful enforcement of labor standards.

On Monday, the AFL-CIO and its president, Richard Trumka, gave a crucial vote of support for the deal.

While the agreement on labor enforcement marks a key breakthrough, Pelosi has said she wants to see any White House changes to the accord in writing.

House Democrats are expected to hold so-called mock markups on a draft bill with the text of the trade accord, a procedure that would allow lawmakers, business groups and other parties to react and possibly seek additional changes.

“Given the limited time remaining on the 2019 congressional calendar, and the possibility that the presidential election will deter consideration of the agreement in 2020, there is a significant chance that the USMCA will not be implemented in the near-term,” Brian Picone and Scott Lincicome, trade experts at the international law firm White & Case, wrote in a recent assessment of the outlook for USMCA.

Daniel Ujczo, a trade lawyer at the firm Dickinson Wright, said: “Everybody’s going to have to take a look and see if it’s go or no-go. What does the private sector, what do the stakeholders think of this deal that’s been made? Many trade deals have been made during markups, and many more have been sent back for more work.”

He added, “So we’re just entering a very important phase right now. And that process is all going to happen while the impeachment trial is going on throughout December.”

Lighthizer and Jared Kushner, Trump’s son-in-law, were said to be traveling to Mexico on Tuesday. Lighthizer’s office didn’t respond to queries about the visit.

The Mexican Senate was briefed on the deal over the weekend. And on Monday, Lopez Obrador, expressing optimism that an agreement was at hand, urged U.S. legislators to act swiftly before next year’s election season comes into full swing.

“Very respectfully, I say we don’t want this very important issue for the economies of three nations to be connected, to mix with, political-electoral matters,” he told reporters.

The comments seemed to reflect a fear in Mexico that the stalled trade-deal debate could extend into next year’s U.S. electoral season, giving some candidates an opportunity to use the accord for the kind of Mexico-bashing that candidate Trump employed during his presidential campaign.

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