Why the U.S. Chamber supports USMCA (U.S.-Mexico-Canada-Agreement)
When is a trade pact less like a marriage and more like a renewal of vows?
Perhaps that’s the best metaphor for the U.S.-Mexico-Canada-Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA). Given the close integration of the three economies, this new agreement is more about renewing and enhancing decades-long ties than starting a new life together.
The U.S. Chamber is pleased to support USMCA, and we’re already rolling up our sleeves to ensure it wins approval by Congress.
Consider the virtues the USMCA brings to the celebration.
First, there’s something old. As Sen. Chuck Grassley, the once and likely future chairman of the Senate Finance Committee, recently said that “95 percent” of USMCA is “the same as NAFTA.” He’s right.
The new agreement maintains many positive elements from the original NAFTA, which eliminated virtually all tariffs between the three North American nations. This openness allows Americans to trade more than $3.5 billion in goods and services with our North American neighbors every day, or $1.2 trillion annually; and this trade supports more than 11 million American jobs.
Our support for the USCMA rests in large part on this continuity, which we see as a reflection of the simple advice we offered throughout the negotiations: “First, do no harm.”
But there’s also a fair amount of something new. The USMCA includes some of the most innovative rules ever achieved in a U.S. trade agreement. When NAFTA was negotiated a quarter century ago, there was no ecommerce, so it’s no surprise the agreement did not address this sector. The digital trade chapter in the USMCA is the best ever negotiated, by any country.
Similarly, the new agreement protects classes of intellectual property, such as biologics, that the old NAFTA did not for the simple reason that they had not yet been invented.
These negotiations were also a chance to revisit some NAFTA outcomes that disappointed. For instance, USMCA expands U.S. dairy producers’ access to the Canadian market, which NAFTA had opened in a very limited way.
Then, there’s something borrowed. In a number of areas, USMCA borrowed liberally from the Trans-Pacific Partnership (TPP), the Asia-Pacific trade pact negotiated by the Obama administration.
The TPP included, for the first time, a chapter imposing new rules on state-owned enterprises (SOEs), which often enjoy regulatory or financial advantages over their private sector competitors. Sometimes SOEs even act as a player in a market they also regulate. USMCA borrowed heavily from the TPP’s SOE text, adding improvements along the way.
The TPP also included strong rules blocking “behind the border” barriers to trade that lack a clear basis in science. All too often, the arbitrary use of technical regulations or standards to block imports is just protectionism in disguise. Here again, the USMCA borrows from and improves on the TPP to make free trade promises a reality.
The USMCA also has something blue — and something green, too. The agreement’s labor and environmental chapters break new ground. Unlike those in NAFTA, USMCA’s labor and environmental obligations are fully enforceable under the agreement’s dispute settlement procedures. In particular, Mexico has committed in USMCA to “specific legislative actions to provide for the effective recognition of the right to collective bargaining.”
In addition, the environment chapter includes “obligations to combat trafficking in wildlife, timber, and fish; to strengthen law enforcement networks to stem such trafficking; and to address pressing environmental issues such as air quality and marine litter.” It also includes prohibitions on some of the most harmful fisheries subsidies, which have contributed to overfishing.
Before the U.S., Canada and Mexico take another walk down the aisle, though, U.S. tariffs on imports of steel and aluminum from Canada and Mexico need to be lifted. Doing so would bring immediate relief to farmers and manufacturers across the nation and would keep the administration’s promise to lift them once a new trade pact was agreed. It’s impossible to envision Congress approving USMCA with these tariffs still in place.
And there’s one more thing: It’s time to end the threats to withdraw from NAFTA. Leaving NAFTA without a successor agreement in place would put 1.8 million American jobs at risk, and it won’t win votes on the Hill — it will cost them. A better strategy is for the administration to get to work building support in Congress on the merits of the deal. The business community is ready help make the case.
The USMCA is not a perfect agreement, but the case for its approval is strong. The agreement is critical to maintaining the $1.2 trillion in annual trade between the U.S. and our North American neighbors and the millions of jobs that commerce supports. We urge Congress to approve it as soon as possible in the New Year.
Myron Brilliant is executive vice president and head of international affairs at the U.S. Chamber of Commerce.