NAFTA is history as Senate gives final approval to USMCA
Congress gave final approval to the new North American trade accord Thursday, with the Republican-controlled Senate moving swiftly during President Trump’s impeachment proceedings to hand him one of his biggest wins since occupying the White House.
There was never any doubt that the Senate would pass the United States-Mexico-Canada Agreement after the House overwhelmingly approved it last month in rare bipartisan fashion.
The only question was by how much, and when it would reach the Senate floor. In the last few days Republican leaders pushed the legislation quickly through several committees, started floor debate Wednesday by unanimous consent and held a roll call Thursday morning before members of the Senate were sworn in as jurors for Trump’s impeachment trial.
The vote was 89 to 10, with one Republican, eight Democrats and Sen. Bernie Sanders (I-Vt.), who is running for president, voting no.
“There was a lot of momentum to get USMCA done and behind the administration before things could get really bogged down with impeachment and frankly the campaign season,” said Daniel Ujczo, a trade lawyer at the Dickinson Wright firm who has been closely tracking the trade measure.
Final Senate action on USMCA, which replaces the North American Free Trade Agreement, came just a day after Trump signed a partial trade deal with China. The deals fulfill two of Trump’s major campaign pledges, although the final agreements achieve far less than Trump promised.
However, the two agreements have significantly eased trade tensions that had darkened the economy over the last two years. Trump slapped multiple tariffs on China during an 18-month trade war, and repeatedly threatened to withdraw from NAFTA if Canada and Mexico did not make concessions.
Trump had long slammed NAFTA as a “disaster” for American industry and workers. In that way he shared the disdain that many Democrats and labor groups have had of NAFTA and free-trade pacts generally, viewing them as job killers. As a candidate, Trump promised to do away with the quarter-century-old pact or rewrite it.
Canada and Mexico are the United States’ top trading partners, with three-way trade in goods reaching about $1.3 trillion.
The three countries began renegotiating NAFTA in the summer of 2017, and the parties concluded talks in September 2018.
House Speaker Nancy Pelosi (D-San Francisco) and other Democratic leaders, however, would not allow the trade bill to move forward until the administration agreed to strengthen enforcement of labor rules and make several other changes to the original deal. The House approved the accord 385 to 41 on Dec. 19, the last legislative working day of the year.
While the final Senate vote was almost a formality, individual lawmakers still had plenty to say.
Speaking in the Senate chamber, Sen. Charles E. Grassley, the Iowa Republican who chairs the Finance Committee, talked at length about the benefits of the USMCA and said it was a shame that it took so long for ratification, which he blamed on “partisan roadblocks.”
California’s two Democratic senators, Dianne Feinstein and Kamala Harris, went separate ways on the bill.
Feinstein, who voted against NAFTA in 1993, said in a statement that she was in favor of the USMCA, calling it an improvement over NAFTA and one that would be good for the nation and California. Feinstein cited as an example the $300 million allotted to clean up pollution from the Tijuana River.
Harris, however, said it was precisely because of shortcomings in the environment chapter that she could not vote for USMCA. The accord doesn’t address climate change, she said, and as such “fails to meet the crises of this moment.”
USMCA drew opposition from leading environmental advocacy groups such as the Sierra Club and the National Resources Defense Council. Senate Democratic Leader Charles E. Schumer of New York said he would vote against the bill “because it does not address climate change, the greatest threat facing our planet.”
Business and labor union groups were mostly supportive of the agreement, although they were hardly effusive about it.
The U.S. Chamber of Commerce expressed disappointment that the administration, under Democratic pressure, stripped out a provision that would have given 10 years of exclusive market protections for certain drugs. The chamber argued that USMCA should not be a model for future trade deals, although that is exactly what U.S. Trade Representative Robert Lighthizer said it would be.
Still, the chamber and other groups like it saw USMCA as better than the possible alternative of losing NAFTA, which would have caused major disruptions in supply chains and tariff-free trade in North America.
Estimates of USMCA’s economic impact vary, but on the whole most don’t see it as having a major effect on the U.S. economy. NAFTA already had done away with most tariffs in North American trade.
NAFTA had 22 chapters. USMCA contains 34 chapters, 13 annexes and 16 side letters. They include new rules and standards on digital trade, state-owned enterprises and currency matters.
USMCA pries open Canada’s closed dairy market. It raises the minimum North American content for cars to receive tariff-free treatment and for the first time links auto production to workers’ pay, in the hopes of curbing the movement of jobs to low-wage Mexico.
The new accord largely does away with a provision allowing foreign firms to sue governments for discrimination or breaking contracts, which critics viewed as a corporate handout and incentive for offshoring.
Most other provisions in NAFTA were maintained or updated to reflect changes in the economy over the last three decades.
Mexico already has ratified USMCA. The Canadian Parliament is expected to approve it later this month. The new agreement will most likely take force in late spring.