Former U.S. ambassador to Canada says time is running out for USMCA
Despite the bipartisan history of the North American Free Trade Agreement, the proposed update known as the United States-Mexico-Canada Agreement has hit a snag in Congress.
Action to ratify the United States-Mexico-Canada Agreement has been a roller coaster ride for the past few months. Just when something happens that knocks the agreement one step backward, something else happens the next day that pushes action two steps forward.
Before getting into USMCA, it is important to understand NAFTA, the agreement that USMCA is essentially updating.
Historically, NAFTA has bipartisan roots. The idea for a multilateral trade agreement was first proposed by Ronald Reagan while on the campaign trail in 1980. The idea would be revisited in 1988 during George H.W. Bush’s presidency, when the three countries began negotiating the agreement.
Thirteen years after the idea was put out into the ether and five years after negotiations began, NAFTA was ratified in 1993. What is significant about this year is the fact that a Democrat president, Bill Clinton, was in office with the support of a Democrat majority in both the House and Senate.
NAFTA passed the House 234-200, including 132 Republicans and 102 Democrats. In the Senate, 34 Republicans and 27 Democrats allowed NAFTA to get to Clinton’s desk with a 61-38 majority victory.
According to the Bureau of Labor Statistics, the U.S. has lost 5 million manufacturing jobs since 2000. While some blame NAFTA for this, Bruce Heyman, ambassador to Canada from August 2014 to January 2017, says it is more nuanced than that.
“What has transpired now over 25 years as the economy has changed, a lot of jobs have been lost not because of moving to a lower wage environment but lost to technology, innovation, robotization – all of these things,” he said.
Heyman thinks it is these factors that have allowed factories to produce just as many goods as they made 25 years ago but with a fraction of the labor. Wages have been mostly stagnant in the 21st century as well. Looking for explanations and something or someone to blame, some – including President Donald Trump – have been pointing fingers at NAFTA.
“It’s a bit of a false narrative,” Heyman said. “Had he said that 20 years ago, it might have been a lot truer. In a conversation I had with a mayor in Ohio who was running for governor, she said to me, ‘Look, 80% of the job loss in Ohio that we’re seeing in our factories is due to automation but 100% of the people now think it’s due to NAFTA.’ And so it’s a false story today.”
While he was ambassador, which was not very long ago, Heyman claims that NAFTA was functioning perfectly for all countries involved.
Others disagreed, thus the renegotiation.
That brings us to USMCA.
Also known as NAFTA 2.0, USMCA is Trump’s attempt to revamp a trade agreement he feels is unnecessary and hurts the U.S. economy. While that may be debatable, it is true that the economy – and the world for that matter – is drastically different than it was 25 years ago. Accordingly, NAFTA needs to be updated to represent today’s reality.
That is exactly what USMCA does. Most of the significant tweaks deal with the automotive industry, including wages for autoworkers and percentages of parts that need to be made in North America. Other important updates include provisions that more accurately reflect the digital age we live in.
Most everything else is pretty much the same.
“If you look at the agreement and peel it back, it looks just like the agreement that we had for (Trans-Pacific Partnership) plus the old NAFTA and merging it together,” Heyman said. “In doing that and merging these two deals together, it’s an update but it isn’t substantially different from what we have.”
Fate of USMCA
So what’s the holdup?
That depends who you ask. Republicans will blame Democrats for intentionally delaying the ratification to prevent a victory for Trump before the 2020 election. Democrats will point fingers at Trump, suggesting his trade wars are making it difficult to move forward.
Trump’s steel and aluminum tariffs on Canada and Mexico certainly threw a wrench in the situation. Those tariffs were lifted, however, renewing optimism for USMCA ratification. Trump again threatened to impose tariffs on Mexico, which was abandoned after Mexico agreed to do something about the immigration problem.
Democrats have been very clear about what they need to ratify the agreement: enforcement. More specifically, while there are many provisions in place that please Democrats, there is nothing in the language that will actually enforce those provisions. If everyone involved is held more accountable, Democrats will be on board.
“The president’s team should have said ‘Hallelujah! You like my agreement, and all you’re complaining about is enforcement? Let’s just get this done,’” Heyman said.
But that is not what happened.
Some, including Heyman, believe that Trump already dropped the ball on a perfect opportunity to ratify USMCA. Before the most recent election, Republicans controlled the House and the Senate, allowing Trump an open window to pass a trade deal like USMCA. At the time, House Speaker Paul Ryan was desperately trying to persuade everyone to get the ball rolling.
Now, there’s a new government in Mexico, a Canadian election this fall and the U.S. House is controlled by Democrats. USMCA went from a slam dunk a year ago to being questionable today.
Both Canada and Mexico have already kickstarted the process to ratify USMCA, with Mexico expecting to ratify the agreement after Land Line goes to press. Although the U.S. has formally began its process, Democrats have indicated the trade agreement will not receive enough votes until their demands have been met.
“The window’s narrow,” Heyman said. “You only have a month or so this summer and then you have a month or two in the fall, because nobody is going to vote on this in Congress in 2020. Nobody is going to do a vote on a trade deal going into re-election in a presidential election.” LL