ITC Report on NAFTA Revision Doesn’t Impress Democrats
President Trump got a gift from the U.S. International Trade Commission Thursday – a mostly positive assessment of the probable economic effects of the US-Mexico-Canada Agreement, formerly NAFTA.
That won’t appease congressional democrats, though. They’re concerned about the extent to which the USMCA’s rules on labor and environmental protection would be enforced. And there’s not much in the agreement to assuage them.
“USMCA would likely have a positive impact on U.S. trade, both with USMCA partners and with the rest of the world,” the ITC said in a 379-page report.
“[T]he agreement would likely have a positive impact on all broad industry sectors within the U.S. economy. Manufacturing would experience the largest percentage gains in output, exports, wages, and employment, while in absolute terms, services would experience the largest gains in output and employment,” the report said.
It predicts nominal gains in employment and GDP, which is the most that one can expect from any trade agreement.
While not explicitly saying so, the report strongly suggests that the agreement’s benefits will only be realized if its rules are enforced.
“If fully implemented and enforced, USMCA would have a positive impact on U.S. real GDP and employment,” the report said.
Caveats like that appear throughout the report:
– “The agreement, if enforced, would strengthen labor standards and rights.”
– “The Commission assesses that full implementation and enforcement of the IPR (intellectual property rights) chapter’s provisions would benefit U.S. industries that rely on IPR protections.”
– “Overall, labor organizations and other observers express the view that USMCA labor obligations will have no impact on wages or labor conditions if member countries fail to enforce these provisions. Despite the agreement’s new and strengthened labor provisions, some groups criticize the agreement’s lack of measures guaranteeing the enforcement or monitoring of its labor obligations.”
– USMCA holds that “parties must enforce their environmental laws, while also retaining the right to exercise discretion with respect to enforcement of those laws.”
Now there’s a loophole you could drive an 18-wheeler through; sure, we’ll enforce our environmental laws, subject to our discretion. It’s glaringly obvious how much enthusiasm the Trump administration has for enforcing environmental laws and regulations – none whatsoever. Dozens of environmental regulations imposed during the Obama administration have been put off or repealed – all for the benefit of business and industry.
And business and industry liked what they saw.
“This comprehensive analysis shows that all broad industry sectors across the U.S. economy will benefit from USMCA,” the Business Roundtable said in a statement.
“[M]embers of Congress reviewing the ITC report and considering their vote on USMCA should look at the big picture. Liberalized trade with Canada and Mexico has been tremendously important to the U.S. economy,” the U.S. Chamber of Commerce said before the report was released. “A vote for USMCA is a vote to continue these far-reaching benefits. To recap, U.S. trade with Canada and Mexico.”
U.S. Sen. Ron Wyden, D-Ore., the ranking democrat on the Senate Finance Committee, said, “This report confirms what has been clear since this deal was announced – Donald Trump’s (USMCA) represents at best a minor update to NAFTA, which will offer only limited benefits to U.S. workers. As I’ve said for months, the administration shouldn’t squander the opportunity to lock in real, enforceable labor standards in Mexico and fix the enforcement problems that have plagued NAFTA.”
The Finance Committee has jurisdiction over U.S. trade policy, as does the House Ways and Means Committee. It’s chairman, Rep. Richard E. Neal, D-Mass., said it was “notable that the Commission consistently highlights the inclusion of enforcement provisions as the key factor in determining whether labor standards and rights will actually be strengthened in Mexico.”
“Before the release of the ITC report, I believed that the renegotiated NAFTA, as written, needed to be improved before House consideration. Nothing in this report alleviates those concerns,” said Rep. Earl Blumenauer, , D-Ore., chairman of the Ways and Means Trade Subcommittee. The House requires stronger provisions on labor, the environment, access to medicine and enforcement.”
NAFTA has no chapters on labor rights or environmental protection. They are addressed in side agreements that are only marginally enforceable. USMCA negotiators agreed to move those side agreements into the body of the agreement and to make them fully enforceable. But there’s a big difference between “enforceable” and “enforced.” Enforcement costs money, and in some cases it’s difficult to do.
For example, USMCA stipulates that at least 40% of a car built in Mexico be built by workers earning at least $16 per hour. Good luck enforcing that.
In order to add enforcement language to USMCA that will satisfy congressional democrats, U.S., Canadian and Mexican negotiators would have to reopen the negotiations and spend weeks or even months hashing it out. That’s not going to happen.
What will happen is that Trump, now in re-election mode, will claim that he transformed what he once called “the worst trade deal in the history of the world,” into what now says is “the largest, most significant, modern, and balanced trade agreement in history.”
Hyperbole aside, Congress still has to approve USMCA and that is far from a foregone conclusion.
John Brinkley was speechwriter for U.S. Trade Representative Michael Froman and for Korean Ambasador Han Duk-soo during the Korean government’s quest for ratification of the Korea-US Free Trade Agreement.
This article originally appeared in Forbes.