The future of the proposed renegotiated free trade agreement between the United States, Mexico and Canada is suddenly murky.
As a new Congress convenes, the deal is quickly becoming the proverbial “political football.” President Donald Trump and leading congressional members have made statements that they plan to use the renegotiated trade agreement to force the Democrats to pass the new deal, called the United States-Mexico-Canada Agreement, or USMCA.
No compromise is in sight. Left hanging in wait are thousands of businesses and millions of jobs created and sustained because of open trade between the three countries.
Industry in Arizona and across the country are calling on the Trump administration and Congress to ratify this crucial agreement. Arizona and 34 other states count Canada and Mexico among their top three export markets.
“We are going to get it done,” U.S. Chamber President Tom Donohue reiterated Thursday after giving his 2019 State of American Business Address. Ratification is a top priority of the chamber this year, he said.
An essential first step is to lift the tariffs on steel and aluminum imports from Canada and Mexico that were supposed to end once the USMCA was agreed to, Donohue said.
“These tariffs – imposed on our partners as a negotiating tactic – have invited $15 billion in counter-tariffs on U.S. agricultural and manufactured goods,” Donohue said in an prepared statement. “Every week that the tariffs remain in place, $500 million in U.S. imports and exports are affected, inflicting significant harm on American workers, farmers, and ranchers. They must be eliminated without delay.”
It took a year of rocky negotiations to get the USMCA in place. President Donald Trump, Canadian Prime Minister Justin Trudeau, and former Mexican President Enrique Peña Nieto signed the agreement on November 30. Now, the three countries’ legislative bodies are going through the months-long process of ratifying the treaty.
Now, political uncertainty is emerging. Shortly after signing the USMCA, President Trump announced that he would be “quickly terminating” the existing North American Free Trade Agreement, to force Democrats to sign the new one. This week, the Senate Finance Committee Chairman Sen. Chuck Grassley (R-Iowa) endorsed that idea, telling reporters that President Trump should “pull out” of NAFTA if the Democrat-controlled House doesn’t support the renegotiated trade deal.
Industry leaders say that is a risky gambit. Withdrawing from NAFTA without a successor agreement could jeopardize millions of American jobs.
With the political parties grappling to compromise on a slew of hot-button issues, the USMCA could face opposition from both parties in Congress over several issues including new provisions dealing with labor reforms.
The USMCA is moving through the process with new and updated provisions in a number of areas including:
Technology – The 25-year-old agreement was updated to include protections for digital trade, intellectual property and technology advancements.
Dairy – Canada agreed to open up more of its domestic market to American producers.
Internet commerce – Duties on certain American goods will not be levied unless they cost $150 Canadian dollars compared to the previous $20 threshold.
Steel – U.S. tariffs on foreign steel will remain in place and are subject to further negotiation between the three countries.
Vehicles – Requires that 75 percent of a vehicle’s value would have to be produced in North America instead of the current 62.5 percent.
Auto workers– Requires that 45 percent of vehicles are made by workers who earn at least $16 an hour.
If approved, the modernized trade agreement is to be reviewed by all three countries every six years and can be adjusted.
In Arizona, Glenn Hamer, president and CEO of the Arizona Chamber of Commerce, said the chamber is making USMCA ratification the organization’s top federal priority in 2019.
“This deal needs to get done,” Hamer said. “We can’t risk the economic harm that would result from the North American marketplace operating without a trade agreement in place that ensures tariff-free cross-border commerce. Congress needs to move swiftly on ratification of the USMCA.
“For nearly 25 years, the North American Free Trade Agreement has ensured North America’s place as the world’s most economically competitive region,” Hamer said. “A new trilateral agreement means North America will maintain that distinction in the years to come.”