Partisanship Alone Unlikely to Decide the USMCA’s Fate
With the U.S. Congressional elections rapidly approaching, there’s been a fair bit of public analysis on the impact a Democrat-controlled Congress might have on the fate of the recently negotiated United-States-Mexico-Canada Agreement or USMCA.
Some have suggested a blue wave in Congress would almost certainly result in the quashing of a trade deal whose fate must be determined by a straight up or down vote. In fact, Mexico’s incoming trade secretary, Luz Maria de la Mora, recently opined that Democrats – who have traditionally viewed free trade in less favorable terms than Republicans – are likely to use the USMCA as a bargaining chip. Others have suggested Democrats may vote down the agreement as a means of spitefully derailing what is widely regarded as one of the Trump administration’s key accomplishments.
Such predictions are certainly plausible given the polarized political dynamic in Washington. But there may be more to quashing the USMCA than political partisanship. After all, each member of Congress, whether Democrat or Republican, represents a defined constituency characterized by its own local needs and considerations. If the USMCA is a stellar agreement that will widely benefit a Congressman’s or Congresswoman’s constituents, it would be politically damaging for him or her to vote against it simply out of spite.
Just how well Americans are embracing the USMCA is an open question. There’s still substantial ambivalence about the benefits of the new trade agreement and the degree to which it will improve Americans’ lives or prospects for employment. A poll carried out by POLITICO/Morning Consult 10 days after text of the USMCA was released by the Office of the United States Trade Representative (USTR) shows 38 per cent of Americans believe the USMCA will have a better or much better impact on manufacturing workers while 29 per cent feel it would have either a neutral or negative effect; the remainder had no opinion. And even fewer (32 per cent), believe the agreement would have a better or much better impact on consumers. Less than half (43 per cent) believe the USMCA is very or somewhat different than NAFTA.
Early reaction from industry groups suggests widespread relief the handshake agreement remains trilateral in nature and lifts the air of uncertainty over trade that had clouded investor confidence over the preceding 13 months. But mitigated anxiety is a far cry from resounding endorsement of an agreement few outside the U.S. Administration were itching to refurbish in the first place.
Given that ambivalence, a nullification of the USMCA’s ratification by Congress wouldn’t exactly be an act of tone deafness, though it would certainly earn it the ire of those groups for whom the agreement won modest concessions (e.g. dairy farmers, manufacturers, retailers, labour groups etc.). And it’s worthwhile noting that Congressional opposition to the USMCA wouldn’t necessarily be the exclusive domain of Democrats. There has been vocal opposition to tampering with NAFTA by Congressional Republicans whose constituents could be adversely affected by changes to select provisions within the trade deal.
Timing is also a critical consideration. A Congressional vote on the USMCA is unlikely to occur before the summer of 2019, after the International Trade Commission has filed its report on the anticipated economic impact of the trade deal. Much can change between the Congressional elections and the ratification vote with respect to how the trade deal is perceived by its most affected stakeholders, and how those stakeholders choose to air their accolades, annoyances and antipathies.
The risk in a ‘no’ vote isn’t just a return to an outdated agreement. The president has already publicly stated his intent to withdraw from NAFTA should Congress fail to ratify the deal his team has negotiated. It would leave Congress with a choice – the new USMCA or no free trade agreement at all, and therefore a return to trade uncertainty.
In addition, a ‘no’ vote would almost certainly secure the USMCA’s place as a 2020 presidential campaign wedge issue. Any candidate who votes in opposition to the USMCA will have to convince his or her constituents the concessions extracted from Mexico and Canada will not benefit the U.S. economy.
All this to say, the ratification of the USMCA does and should hinge on far more than a shift in the composition of Congress. A blue wave on November 6th shouldn’t necessarily be interpreted as a death knell for the budding trade deal. With any luck, members of Congress – regardless of their political stripes – will decide the USMCA’s fate based on the ITC’s economic impact report, combined with feedback from industry groups and their own constituents. That would not only serve to solidify the merits and/or risks embedded within the agreement, but would tangibly demonstrate to Americans that their political representatives are truly working on their behalf.
Candace Sider is vice president of Government and Regulatory Affairs North America at trade-services firm Livingston International. She is a frequent speaker and lecturer at industry and academic events and is an active member of numerous industry groups and associations.
GLOBAL ECONOMY EXPECTED TO SLOW