Updated: Jan 20, 2020
USMCA passes Senate by a vote of 89-10
By: Summer Senter, Wellington Dupont
The United States-Mexico-Canada Agreement
In December 2019, the US House of Representatives approved President Donald Trump’s signature trade deal, the United States-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA).
After months of negotiations, Democrats and Republicans were able to come to an agreement on the new trade deal, with Speaker of the House Nancy Pelosi echoing the president’s assertions that this new deal will be far better than NAFTA. The approval of the agreement marked a significant bipartisan accomplishment of the presidency, which came in stark contrast to the House’s vote to impeach President Trump just one day before.
USCMA vs NAFTA
The updated trade agreement has several differences:
Auto manufacturing Changes
The USMCA will require 75% of a vehicle’s parts to be made in one of the three countries. More vehicle parts will be required to be made by workers earning at least $16 an hour, boosting manufacturing in the United States instead of Mexico. The International Trade Commission report found that these changes will add 28, 000 jobs in the industry over six years. The Trump administration reported more positively that the deal will create 76, 000 auto jobs in five years.
The USMCA will keep tariffs for agricultural products between the three countries at zero, and further open the Canadian market to US dairy, poultry and eggs. The US will also allow more Canadian dairy, peanut products, and a limited amount of sugar to cross the border.
The USMCA has received the backing from the AFL-CIO, the largest federation of unions in the US, for its strengthening of labor laws which include a requirement for parties to not only enforce their own laws, but also adopt and maintain laws on core worker rights related to the International Labor Organization. A prohibition of imports of goods made by forced labor, New commitments related to violence against workers, migrant worker protections, and workplace discrimination.
The USMCA includes a new chapter on the digital economy, unlike NAFTA. The chapter is intended to provide a boost to US businesses, and it will affect digital trade.
The USMCA outlines a broad list of environmental topics that will be addressed through trilateral cooperation. This will include $600 million provided for environmental issues in the US, combatting illegal trade in forest products and combatting marine plastic litter.
The trade deal originally had provisions to require the three countries to provide at least 10 years of exclusivity for biologic drugs. However, Democrats renegotiated the removal of these provisions much to the disapproval of the pharmaceutical industry who claimed the provisions would have provided vital protections for innovators.
Passage of the Bill
On Thursday January 16, 2020, the Senate came together to pass the USMCA. It passed with a vote of 89-10. 9 Democrats and 1 Republican, Sen. Pat Toomey of Pennsylvania, voted against it.
The bill will now go to the President’s desk to be signed.
What does USMCA Mean for Canadian Trade?
The Dairy provisions mark a potential loss for Ontario and Quebec dairy farmers because it eliminates a domestic pricing scheme for imported dairy products - resulting in a win for US dairy farmers who now have access to a new market of Canadian filtered milk processors.
However, the automobile rules are considered positive for both the United States and Canada, as the requirements will help move automobile working away from Mexico.
Mexico has already passed the deal, and now that the United States has as well, the USMCA will have to wait for Canada to ratify the deal before it can take effect. Prime Minister Trudeau has stated that he was reasonably confident his government would have enough votes to approve the treaty. However, Canada’s opposition parties have suggested that they could move to delay ratification, arguing a lack of consultation in the negotiations.
Due to the Canadian Parliamentary Calendar, Canadian legislators will not be back from break until January 27, at which time Trudeau has stated he will try to push the deal through as quickly as possible.
Summer Senter is a Consultant with Wellington Dupont Public Affairs and can be reached at email@example.com.
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