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Has Move to Impeach President Trump Pushed Aside the USMCA?

USMCA

Has Move to Impeach President Trump Pushed Aside the USMCA?

The momentum to impeach in Washington, D.C., is not only hurtling Congress and President Donald Trump toward a potential constitutional crisis, but the prospect of reaching a solution to the ongoing trade standoffs has dimmed considerably.

That’s the opinion of leading international trade lawyer Clifford Sosnow, who notes the time frame for passing the U.S.-Mexico-Canada Agreement (USMCA)—and thereby revamping the North America Free Trade Agreement (NAFTA)—is growing shorter by the day, denting plans for global companies that rely heavily on exports.

“With impeachment officially on the table and the hyper-partisan climate in the lead-up to next year’s elections, there is serious concern whether the USMCA is dead in the water,” says Sosnow, an Ottawa-based partner with Canadian law firm Fasken.

“It’s unclear how much of a window is even left for approval of the USMCA. There are also high odds of failure post-election, especially if the Democrats win. The party has not shown any enthusiasm for the USMCA in its current form.”

Sosnow is not shooting from the hip in an easy chair. He has appeared before NAFTA and WTO panels and the Canadian International Trade Tribunal, and he has numerous clients affected by tariffs as well as any decisions on NAFTA, including automobile manufacturers, banks, service companies, IT companies, large retailers, manufacturers, agriculture business, aerospace firms, and transportation companies.

business

Where do People Travel for Business?

When it comes to global business, the right transportation is essential. Getting talent from one side of the globe to another matters as much as ever it has – and perhaps even more so. But which cities are the most attractive for modern business? This is a question whose answers have remained more or less the same over the last four or five years, despite the fact that global business flights have more than doubled.

New York

The Big Apple leads the pack when it comes to inbound business flight, and it has done since 2014. This is largely thanks to its status as a centre of global finance, but it’s also because New York is among the most business-friendly states in the US, with a range of tax incentives offered to startups. Buzzfeed and WebMD originated here. Whether you’re taking a private jet or a commercial airliner, New York remains the world’s premier destination for business travellers.

London

London has consistently run a close second, despite the uncertainty still lingering over Brexit. Among the biggest draws of the capital is the English language, which remains the second most widely-spoken language in the world (and probably claims the top spot when we count only the customers of international airports). London contains around 15 businesses per hundred residents; the figure for the rest of the UK is around 10.

Paris

Paris is something of a fast-climber, experiencing around twenty-per cent growth over the two-year spell from 2016-2018. It’s easy to see why a business might locate here; Paris has an enormous amount of culture and history to offer, and thus it’s easy to persuade would-be staff to settle here. While France might have something of a reputation for overbearing bureaucracy (the word, is, after all, derived from a French one), the business environment is competitive enough to tempt many international businesses and skilled employees looking to sample life on the continent.

Shanghai

With China having established itself as a global power, it’s probably no surprise that its busiest airport is so attractive to international business customers. While the city isn’t quite as attractive to western travellers as the other entries to this list, it’s a location that no globalised business can afford to neglect – and this is reflected in its rapid rise as a centre of international air traffic. 

Among the more interesting trends in global air traffic generally has been an increased spread between different continents, with five of the seven listed in the top twenty destinations. There is perhaps no better example of this than that of Shanghai.

Toronto

Toronto outranks many US cities, including San Francisco, Houston and LA. As with New York, there is a range of incentives to businesses looking to grow here. The combined rate of corporate and income tax sits at around 26.5%, which is lower than the US average by around thirteen percentage points.

Singapore

Like Dubai, Singapore claims a great deal of air travel thanks to its popularity as a stop-off for long-haul flights between Europe and Australia. But there’s more to Singapore than that. The country is widely regarded as an ideal place from which to tap into Asia’s emerging markets. The location is strategically attractive, the workforce is competitive and the economic policy is explicitly favourable to business. It’s also emerging as serious competition for Hong Kong’s financial centres. For the world’s business travellers, there’s no shortage of reasons to pay this part of the world a visit.

USMCA

How a Footnote in the USMCA Undermines Economic Liberty

House Democrats are holding up ratification of the U.S.-Mexico-Canada Agreement (USMCA) until U.S. Trade Representative Robert Lighthizer agrees to make some changes. While a number of the big concerns about the new NAFTA, such as enforcement, biologic drugs, and the implementation of Mexico’s labor laws have received a lot of attention, there is another issue that has flown under the radar, perhaps in part because it’s buried in a footnote.

Chapter 7 of the USMCA, “Customs Administration and Trade Facilitation,” includes a section on “Express Shipments.” These are goods of low or negligible value that are shipped by courier or express mail services in large volume. Think about that pair of shoes you just ordered from France. That’s an express shipment.

Because there are so many of these packages coming through customs facilities, and it’s such a burden to process them, most countries have what is called a de minimis threshold, that is a set value below which imported goods are both sales tax and duty free. The United States has the highest de minimis threshold in the world, allowing individuals and businesses to make purchases from abroad up to $800 with no duty or tax collected by customs.

As Gary Hufbauer, Euijin Jung, and Lucy Lu explain, high de minimis thresholds are not only good for consumers, who do not have to deal with the complexity and time delays in processing customs duties and sales tax on the things they buy, but also for small businesses, because of the importance of intermediate inputs, as well as cross-border sales for their profits.

As part of the USMCA, Canada and Mexico both raised their de minimis thresholds, which not only helps small businesses in the United States but also consumers in both countries as well. Canada raised its de minimis threshold to $150 CAD from its original $20 CAD limit, and sales tax cannot be collected until the value of the product reaches at least $40 CAD. Mexico increased its de minimis from $50 USD to $100 USD, with tax free de minimis on $50 USD.

While the U.S. did not alter its de minimis threshold in USMCA, there is a curious footnote in Chapter 7 that should be cause for concern. It reads:

Notwithstanding the amounts set out under this subparagraph, a Party may impose a reciprocal amount that is lower for shipments from another Party if the amount provided for under that other Party’s law is lower than that of the Party.

Now we are all well aware of this administration’s distorted concept of reciprocity, and they seem to be applying it here as well. What this footnote suggests is that the U.S. could potentially lower its de minimis threshold to match what Canada or Mexico have agreed to. To put this in perspective, in 2016, the United States increased its de minimis level to $800 from $200. This footnote would allow the de minimis to drop even below the 2016 limit. This is not only an attack on economic liberty for American citizens, but it would be an enormous step backward on a policy where the United States has been a leader for liberalization.

Back in June, Robert Lighthizer was directly asked about this footnote by multiple members of the House Ways and Means Committee during a hearing on the 2019 trade policy agenda. While a number of excellent questions were raised, I highlight two below. First, Rep. David Schweikert (R-AZ), noting bipartisan support for the current de minimis threshold, stated:

In 2016, Congress raised the U.S. de minimis threshold to $800 in the bipartisan Trade Facilitation and Trade Enforcement Act. This change enjoys wide bipartisan support in Congress and throughout the e-commerce landscape. The current threshold benefits millions of American small businesses, across all sectors, including manufacturers, who rely on low-value inputs for the production of U.S. exports. As a result, American small businesses now enjoy more rapid border clearance, reduced complexities and red tape, and lower logistics costs, while American consumers benefit through faster, less expensive access to a wider range of goods.

Given the benefits of the current de minimis threshold to American small businesses and the U.S. economy as a whole, and that Congress legislated on the U.S. de minimis level only a few years ago, I remain extremely concerned over the Draft Statement of Administrative Action (SAA) on the U.S.- Mexico-Canada Agreement (USMCA) transmitted to Congress on May 30. This draft SAA includes language suggesting that you may seek changes to the U.S. de minimisthreshold through the USMCA implementing bill. As you know, last December, Rep. Kind and I led a bipartisan letter urging you not to seek to lower the U.S. de minimis threshold. My position has not changed.

I strongly oppose including any language in the USMCA implementing bill that would lower the U.S. de minimis level or that would delegate this authority to the Executive Branch. As you work with Congress to finalize the USMCA implementing legislation, will you commit to not seeking authority to lower the U.S. de minimis threshold?

Rep. Daniel Kildee (D-MI) also emphasized how this change would undermine Congress’s authority to regulate commerce:

In 2016, Congress raised the U.S. de minimis threshold to $800 in the bipartisan Trade Facilitation and Trade Enforcement Act. The current threshold benefits millions of American small businesses, across all sectors, including manufacturers, who rely on low-value inputs for the production of U.S. exports. As a result, American small businesses now enjoy more rapid border clearance, reduced complexities and red tape, and lower logistics costs, while American consumers benefit through faster, less expensive access to a wider range of goods.

Given the benefits of the current de minimis threshold to American small businesses and the U.S. economy as a whole, I was curious to see the Draft Statement of Administrative Action on the U.S. Mexico Canada (USMCA) includes language that you may seek authority for the Executive Branch to set U.S. de minimis thresholds. Congress must maintain its Constitutional authority to set tariffs – including de minimis thresholds.

As you work with Congress to finalize the USMCA implementing legislation, can you commit not to seek the derogation or authority to derogate from the current U.S. de minimis threshold?

Amb. Lighthizer’s comments to all questions on the de minimis threshold remained the same:

As noted in the Administration’s submission to Congress on changes to existing law and the draft Statement of Administrative Action, we identified this as an issue for consultation with the Committee on Ways and Means of the House and the Committee on Finance of the Senate. These consultations are underway. I look forward to continuing those conversations with you and other Members on this important issue.

Congress should continue to press the administration for the removal of this footnote from the USMCA. It may seem like a small part of the broader USMCA debate, but Congress should not be fooled. This is representative of the broader attempts by the executive branch under this administration to expand its power into areas where the Constitution gives Congress express authority. Congress should not give up its authority to regulate foreign commerce, and should actively push to rein in the abuses of the executive in trade policy. By pushing for this on de minimis, we can get one step closer to ensuring that the Trump administration’s trade policy remains as its own small footnote in the history of U.S. trade policy.

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Inu Manak is a visiting scholar at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.

BYD

BYD Expands Electric Transportation to Canada

As part of the electric-vehicle company’s efforts to expand its footprint, BYD opened its first Canadian bus assembly plant in Newmarket, Ontario leading efforts in providing electric buses for the Toronto Transit Commission. BYD will supply 10 fully electric buses with the option of an additional 30. The company currently boasts operating or on-order buses for Toronto, Vancouver, Longeuil, St. Albert and Grand Prairie regions.

BYD is a leader in providing emissions-free transportation options through utilizing innovative technology options for cars, buses, trucks, forklifts, and rail systems.

Following the recent announcement pledging climate-considerate transportation options across Canada, Build Your Dreams (BYD) released comments and information surrounding the topic of emissions-free initiatives in the Canadian region.

“We applaud today’s announcement in British Columbia and commend the funders behind this forward-looking initiative. The investment today by the Government of Canada and the Government of British Columbia will support communities and help the environment. It’s this type of climate leadership and investment in zero-emissions public transportation across Canada that led BYD, the world’s largest electric vehicle maker, to open an assembly facility in Canada,” said Bobby Hill, Vice President BYD Coach and Bus.

“This announcement reaffirms the country’s stature as a world leader in reducing harmful emissions and makes us proud of our decision to come here.”

USMCA Sunset Clause Offers Potential Resolution to Ratification Impasse

Those who have been closely following the saga of revamped free trade in North America will know well that the fate of the United States-Canada-Mexico Agreement (USMCA) could very well be decided on the degree to which lawmakers are able to suspend their cynicism over labor reforms in Mexico to buy into the labor-enforcement provisions set out in the agreement.

Democrats in Congress want to see labor-enforcement provisions within the USMCA made stronger, clearer and part of the actual agreement (as opposed to a side letter). Their demands stem from the fear the USMCA will do little to curb the flight of manufacturing jobs from the United States and into Mexico where workers are paid less and there are fewer regulations with which to contend.

These concerns are fair and warranted, but both Mexico and Canada have unequivocally stated they do not intend to reopen negotiations. Mexico in particular, which just recently passed a labor reform bill that will allow workers to vote on unions and their labor contracts via secret ballot, has said no further concessions will be made.

All three parties have dug in their heels, making ratification of the USMCA seem unlikely in the near term. And yet the agreement’s ratification is crucial to the ongoing prosperity of all three countries’ economies and to North America’s status as the world’s largest trading bloc. Failure to ratify the USMCA won’t simply mean that free trade will revert back to NAFTA. The president has stated repeatedly that if the USMCA isn’t ratified, he will unilaterally withdraw from NAFTA, pitting himself against lawmakers in Congress and putting the future of free trade in North America in jeopardy.

Sunset can brighten gloomy outlook

While each party presents a valid position, digging in on labor provisions (and, more peripherally, environmental ones) that prolong trade uncertainty in the largest trading bloc in the world is entirely unnecessary.

There are valid mechanisms in place that Democrats can use to ensure the enacted labor reforms are enforced and that Mexico is holding up its end of the bargain with respect to labor practices.

When the USMCA was signed in November 2018, it included a sunset clause that had been a source of tension and controversy during the negotiation period. The purpose of the clause was to force the parties to revisit the deal periodically to ensure it is working as it should for all involved. In its final iteration, the clause would see the USMCA automatically terminated 16 years after its implementation. However, six years after implementation, a joint review of the agreement would take place, at which time the parties could unanimously choose to extend the sunset period to 16 years from the six-year review, with another joint review to follow six years later. Failure to achieve unanimity at any six-year interval would require additional reviews to take place each year thereafter until the initial 16-year period concludes or until a consensus is reached on how to address the complainant party’s concerns.

If that sounds awfully and unnecessarily complicated, that’s probably because it is, particularly since the USMCA allows for any one party to withdraw from the agreement at any time with a six-month notice, making a sunset clause gratuitous. Nevertheless, it is how the current text of the agreement reads and, barring the unlikely possibility of the USMCA’s renegotiation, is how the agreement will be implemented.

Drifting off into the sunset

Assuming no one party relents, the most obvious way around the impasse would be for Democrats to ratify the agreement as it is currently written with the intent to watch closely how its labor provisions are enforced in Mexico. (Precisely how the monitoring of enforcement will take place is a separate but related disagreement between the White House and Congressional Democrats.)

After six years, there will be an opportunity to review the agreement and put Mexico on notice that it will need either to better enforce the labor provisions set out in the USMCA or see the U.S. exit the agreement when the 16-year period closes. In the event the annual review gets bogged down in bureaucratic inefficiency, lawmakers and the president of the day will have the withdrawal clause at their disposal to expedite compliance.

Unfortunately this will put U.S. industry in a Catch 22 position. Those businesses invested heavily in Mexican production will have to choose either to remain steadfast in their support of Mexico’s existing cost-effective labor regime or align with USMCA detractors in Congress at that time to exert pressure on Mexico to improve enforcement of labor provisions with the understanding that their failure to do so could put free trade in North America in danger.

Relying on the sunset clause may seem to be the equivalent of kicking the can down the road. However, the interim period would offer tremendous benefit. It would provide businesses the opportunity to adapt to the agreement’s new provisions and reconfigure their supply chains to make optimal use of the USMCA. It would allow production practices in Mexico to adjust to new labor and environmental provisions. It would offer Mexican officials the chance to demonstrate to the U.S. government that they intend to honor their USMCA commitments (not just in spirit, but in practice), and would demonstrate to Mexican officials that U.S. lawmakers are willing to give them the benefit of the doubt. Most importantly it would allow for stability to return to North America’s trade environment and the businesses and consumers who rely on it for prosperity and cost efficiency.

It may not be a perfect solution, but it is a viable alternative to the current options of lingering trade uncertainty, or worse yet, quashing the USMCA altogether and potentially precipitating a presidential decree to withdraw from NAFTA and with it a lengthy legal battle over the president’s legal authority to do so.

Cora Di Pietro is vice president of Global Trade Consulting 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. She can be reached at cdipietro@livingstonintl.com.

SHOULD WOMEN HAVE THEIR OWN PROVISIONS IN FREE TRADE AGREEMENTS?

The topic of women’s participation in international trade has been lightly touched in trade agreements. It shows up in aspirational language in a preamble, through a mention in a chapter on cross-cutting issues like labor, or in a non-binding side agreement accompanying the main text of an agreement. Canada introduced a standalone trade and gender chapter in its updated trade agreement with Chile, and is on a mission to spark a global conversation about whether and how trade and gender issues should be addressed in trade agreements.

As rallying calls of “Trade for All” and economic inclusion reverberate throughout national trade agendas, international forums, and across trade negotiation tables, here’s a closer look at trade and gender issues, how trade agreements of the past have addressed them, and how a new generation of trade and gender chapters aim to change the narrative.

In Developing Countries, Just One In Five Exporting Firms Led by Women

Despite comprising half of the global population, women generate just 37 percent of gross domestic product (GDP) and run only one-third of small and medium-sized enterprises (SMEs). Women participation in the economies of developing countries is typically lower than average, with female business ownership dipping as low as three to six percent in some countries.

Women in developing countries are often concentrated in small and medium-sized enterprises (SMEs) and in export-oriented sectors like apparel, textiles and electronics manufacturing. Women-owned businesses in developing countries are less likely to export than their male counterparts, however. In a 2015 survey of 20 developing countries, the International Trade Centre found that just one in five exporting firms was led by women entrepreneurs.

Exporting is a powerful tool for women to grow their businesses by expanding into new markets. The United States is an example of how exporting can support the success of women-owned businesses. According to the International Trade Centre report, women-owned businesses in the United States that export tend to pay more, are more productive, hire more employees, and record higher than average sales than those who do not export.

U.S. women-owned businesses that export

It’s Not Just a Paperwork Issue

Trading across borders can be challenging for women, especially those who run small-scale firms in developing countries. A recent World Bank article highlights some of the key challenges women traders face – from corruption to harassment, cultural and legal barriers, and even just the amount of time they’re able to dedicate to their businesses while also expected to take care of their families. A female trader in Vietnam said it best, “In Vietnam, women have to do double the work. We manage our business and we take care of our families. We have to arrange time to do cross-border trade.”

Support for empowering women through trade is growing in international forums as of late. In December 2017, 118 members of the World Trade Organization (WTO) endorsed the Buenos Aires Declaration on Trade and Women’s Economic Empowerment. The goal is to increase women’s participation in trade and remove barriers to women’s economic empowerment. Members agreed to investigate ways to better tackle barriers and lack of access to trade financing, as well as collecting better gender-disaggregated economic data.

Member economies of the Asia-Pacific Economic Cooperation Forum have also created an agenda on greater inclusion of women in the regional economy through its Policy Partnership on Women and the Economy, an initiative promoted by the United States during its host year in 2011. The forum is working to address access to capital, access to markets, support for skills development, advance women into leadership roles in business, government, community and political levels, and to ensure that women don’t get left behind in scientific, innovation, and technology sectors. Without addressing these barriers, women would be less apt to take advantage of economic opportunities created by trade agreements.

How Have Trade Agreements Addressed Trade and Gender in the Past?

While the addition of specific chapters on trade and gender in trade agreements is a relatively new approach, the inclusion of gender-related provisions in regional trade agreements is not a recent phenomenon.

According to a 2018 WTO study, the number of gender-related provisions in RTAs has steadily increased since 1957. As of 2018, 74 regional trade agreements contained at least one gender-related provision. These provisions have evolved and changed significantly over the years. The study found that most gender-related provisions were couched in “best endeavor” language and focus on cooperation on gender and gender-related issues, like labor, health and social policy.

RTAs with gender provisions

 

What Do New “Gender Chapters” in Trade Agreements Include?

Chile and Uruguay were the first two countries to introduce a standalone chapter on trade and gender in a bilateral agreement in 2016. This was followed by the trade and gender chapter in the updated Canada-Chile Free Trade Agreement (CCFTA) signed in 2017.

The trade and gender chapter in the CCFTA contains four key components:

Acknowledgement of the importance of incorporating a gender perspective into economic and trade issues to ensure that economic growth is inclusive.

Reaffirmation of commitments to implement UN conventions against gender discrimination.

Cooperative activities and capacity building such as the promotion of access to financing and female entrepreneurship, the development of women’s networks, and greater participation by women in decision-making positions in the public and private sectors.

Establishment of a committee to oversee cooperation activities, review operations of the trade and gender chapter, report on the implementation of activities, and monitor other chapters for their effects on gender.

What Impact Might These Provisions Have?

The modernized CCFTA only recently went into force in February 2019, so it’s too soon to assess what impact the new trade and gender chapter will have for women in both countries. In a policy paper, UNCTAD called the CCFTA trade and gender chapter a “welcome step” but also said it remained a “light component” considering milestones and specific goals were not included, dispute-settlement mechanisms did not apply to the chapter, and harmonization of gender-related legislation between parties was not mandated.

Despite these perceived shortcomings, UNCTAD suggested the trend to include trade and gender chapters in trade agreements was positive: Raising the profile of trade and gender issues in the trade arena would encourage both civil society and the private sector to participate more broadly in the implementation of agreements, enhance cooperation on gender issues between parties to the agreements, and strengthen capacity-building between nations on barriers to women participating in the economy through trade.

Canada’s “Progressive” Push in CPTPP

Canada succeeded in adding trade and gender chapters to some of its recent bilateral agreements, but has faced resistance at the regional level. Although the actual words “comprehensive” and “progressive” were added in front of the TPP title, the CPTPP does not contain a trade and gender chapter. Instead, it contains non-binding language in the preamble reaffirming the importance of gender equality for all CPTPP members. It also includes provisions in the development chapter related to women and economic growth (Article 23.4). While not directly referencing women, chapters related to SMEs and cross-border digital trade should also benefit women by expanding trade in these areas.

Adding a new trade and gender chapter was included among Canada’s core negotiating objectives at the onset of NAFTA renegotiations with the United States and Mexico. This new chapter ultimately did not make the cut in the new United States-Mexico-Canada agreement (USMCA). The new USMCA agreement does contain provisions related to gender, however, including in the labor chapter and the SMEs chapter. This is an improvement over the original NAFTA agreement, which addressed gender and trade in a side accord rather than in the main text of the agreement.

Part of the argument against gender-specific provisions is that any benefits of a trade agreement should be theoretically gender-neutral. For example, provisions that help facilitate trade by small- and medium-sized enterprises should help female business owners the same. But just as there are few gender disaggregated trade data, there’s still much to be learned about how trade reforms benefit women.

More Pieces of the Puzzle

While there’s been considerable buzz around the inclusion of new trade and gender chapters in FTAs, UNCTAD experts say they are really just one piece of the puzzle. In order to yield the best results, trade and gender chapters need to be partnered with gender-related assessments of trade measures prior to the agreement to be most effective later on.

UNCTAD developed a Trade and Gender Toolbox as a framework to help countries evaluate the impact of trade reforms on women and gender inequalities before implementing them. These assessments can help countries rethink planned trade reforms or identify the need for accompanying measures to offset negative impacts on at-risk groups, like women. APEC has taken a pragmatic approach, training women to advance in traditionally male-dominated industries like energy and mining, studying successful women entrepreneurs in the ICT sector, sharing information on investing in women entrepreneurs, and even taking on specific individual goals for increasing women in private and public leadership roles. APEC is also working in critical areas such as education, sexual harassment, health, and social expectations for women as caregivers – areas a trade agreement would not be expected to address.

As more countries take up the mantle of “Trade for All”– not just Canada, but also the European Union, Chile, New Zealand and others — we will continue to see trade and gender chapters in new RTAs evolve and more initiatives to share and implement best policy practices. Yet, it remains to be seen if this “next generation language” in FTAs will make a tangible difference for the hard-working women trading around the world.

Lauren Kyger

Lauren Kyger is Associate Editor for TradeVistas. Prior to joining TradeVistas, she was a Research Associate at the Hinrich Foundation focused on international trade issues. She is a Hinrich Foundation Global Trade Leader Scholar alumna, earning her Master’s degree in Global Business Journalism from Tsinghua University in Beijing. She received her Bachelor’s degree from the Walter Cronkite School of Journalism and Mass Communication at Arizona State University.

This article originally appeared on TradeVistas.org. Used with permission.

The USMCA – Beyond Labor & Autos

There’s been a tremendous amount of ink spilt as of late about the ongoing battle on Capitol Hill over the labor-enforcement provisions of the United States-Mexico-Canada Agreement (USMCA) and, more recently, about the degree to which the new Rules of Origin for autos will positively impact sector employment.

There is still no light at the end of the tunnel with respect to labor-enforcement impasse. While Mexico recently passed labor-reform legislation that will allow workers to vote on unions and their labor contracts through secret ballots, Democrats maintain the enforcement provisions within the USMCA are insufficient and are unlikely to create the conditions necessary to prevent the continued flight of American jobs south of the border. Republicans maintain the labor provisions are a cut above NAFTA and are America’s best chance of holding Mexican officials accountable (politically and financially).

Similarly, the White House maintains the automotive Rules of Origin, featuring significantly higher North American content requirements, will generate far more jobs the 28,000 highlighted by the U.S. International Trade Commission’s report released last month.

The result of the impasse is ongoing ambiguity over the fate of the beleaguered trade deal and, in turn, the fate of free trade in North America.

While there’s no question these are important considerations and that reconciling the impasse would serve to secure the longevity of the USMCA, there is significant danger in making these issues deal breakers.

There’s more to free trade than labor enforcement and auto-sector employment

The USMCA is about far more than updating or improving labor standards, or even refining Rules of Origin for North American automobiles. It’s is a wholesale modernization of a trade deal that has solidified North America’s position as the largest trading bloc in the world.

While impassioned pleas have been made by Republicans and Democrats, policymakers often fail to acknowledge the impact of the agreement and free trade in general across the broader U.S. economy.

The importance of free trade to America’s economy and industries presents an irrefutable argument for ratifying the USMCA and augmenting free trade in North America.

Canada and Mexico are among the top three export markets for 49 U.S. states, and either Canada or Mexico is the top trading partner for 39 U.S. states. Approximately two million American jobs are supported by manufacturing exports to Canada and Mexico alone.

Since NAFTA was enacted in 1993, U.S. services exports to Canada and Mexico have tripled from $27 billion to $91 billion. American farmers rely heavily on access to the Canadian and Mexican markets with one-third of U.S. agricultural exports going to their southern and northern neighbors.

Much of the prosperity generated by free trade in North America has directly benefitted small businesses in the U.S. which count Canada and Mexico as their top two export destinations.

Looking beyond labor provisions and automotive rules of origin

The aforementioned data should be reason enough to make the ratification of the USMCA a sure bet. And yet, the new deal has the potential to further expand trade across North America and provide real benefits to American businesses and workers.

The intellectual property protections will shield producers against counterfeit goods and spur activity in IP-intensive industries, which currently support 45.5 million jobs that generate 6.6 trillion in U.S. GDP, according the U.S. Chamber of Commerce.

The agreement also reduces red tape and puts forward fair and transparent regulatory procedures, further enabling America’s small businesses to engage in the import and export of goods.

And while the growth of e-commerce and digital products creates new challenges for international customs agencies and the World Customs Organization regarding the appropriate application of duties, the USMCA introduces new provisions for a digital economy that will help to secure cross-border data flows, prohibit customs duties on transmission of electronic products such as e-books, and see continental cybersecurity collaboration.

The USMCA streamlines customs procedures, harmonizes regulatory policies, promotes e-commerce, offers greater access to Canada’s dairy market and retains critical dispute-resolution provisions for country-to-country disputes.

Broadening Public Discourse of USMCA

Rarely are the benefits listed above mentioned in public discourse over the USMCA, which has become almost obsessively hinged to labor-enforcement provisions. This is not to suggest those provision aren’t important. Indeed, the very impetus behind renegotiating NAFTA was to level the playing field with respect to labor, particularly in the manufacturing sector.

Similarly, changes to the Rules of Origin for autos are important to consider. No other industry has seized on the benefits of NAFTA to create integrated, continental supply chains the way the automotive industry has. Changes to how these supply chains function will impact production and distribution models, as well as employment and consumption trends.

It’s critical to discuss these issues. But it’s equally important the many other wide-ranging reforms outlined in the USMCA aren’t lost or overshadowed by that discussion. Neglecting to consider these benefits would be a disservice not only to the many stakeholders and negotiators who fought hard to ensure their inclusion into the agreement, but to the millions of Americans who would stand to benefit from these inclusions. Given that these same Americans are the constituents of the men and women in Congress, failing to ratify the USMCA over any single provision would be a classic case of members of Congress cutting off their noses to spite their faces.

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.

Sigfox Introduces Canada’s First Ever National IoT Network

Sigfox Canada is bringing a new level of connectivity for Canadian businesses by leveraging a low-power wide area network (LPWAN) technology capable of supporting deployments from millions of IoT sensors stretching from St. John’s all the way to Vancouver, British Columbia with more coverage underway.

“We are thrilled to bring the Sigfox Global Network to Canada,” says Kent Rawlings, President of Sigfox Canada. “We are building a national IoT network capable of connecting millions of individual devices that will forever change the way businesses and cities operate. We look forward to furthering innovation in Canada and creating a more connected world using the Sigfox low-power wide area network. It’s with Sigfox Canada’s ultimate goal to give the entire country the opportunity to use IoT connectivity that we’ll change the way businesses measure and monitor their daily operations.”  

The new network’s extended coverage is projected to cover more than 14 million Canadians in cities, towns, airports and universities by the end of June of this year. Sigfox will also extend its services and confirmed it will be live in every province around the same time. The company boasts a 90-day turnaround for building coverage.

“We want to solve the problems that are holding back the proliferation of IoT by creating a national low-cost network, using devices that require minimal power and simple communication technology to easily provide connectivity to any device or object,” said Rawlings. “Our management team has more than 60 years of experience in telecommunications, and we understand the intricacies involved in building and operating high-performing networks. Once Sigfox Canada is fully deployed, anyone will be able to connect anything to the Internet of Things using one of our Sigfox enabled devices.”

Ratifying USMCA the Only Responsible Option at this Point

The fate of free trade in North America is hanging in the balance.

That sentiment would have been true 18 months ago when negotiations of NAFTA began. It would have been true six months later when the parties failed to meet their self-imposed first deadline. It would have been true last October when it appeared the U.S. was prepared to sign a bilateral deal with Mexico and exclude Canada. And it’s still true today as the agreement gets lost in the fracas of politicking in Washington.

The impending release of the U.S. International Trade Commission (ITC) report, which provides members of Congress with in-depth analysis of the potential economic impact of the proposed United States-Canada-Mexico Agreement (USMCA), may very well have minimal impact in swaying Congressional opponents of the deal.

According to a recent report in Politico, the ITC’s analysis is likely to suggest the USMCA will have a negligible impact to U.S. GDP, which won’t serve as a bulwark against complaints by House Democrats that the agreement is short on enforcement mechanisms for its labor provisions. If that weren’t threatening enough, Ottawa has now suggested it may not ratify the USMCA unless Washington removes the Section 232 tariffs on aluminum and steel imports.

Yet, regardless of the ongoing warfare on Capitol Hill and the potentially uninspiring data in the ITC report, the reality is that at this point in time the ratification of the USMCA is the best possible option. The handful of alternatives available will only serve to further destabilize confidence in and certainty around the future of trade within North America.

Renegotiation

Democrats have been demanding stronger enforcement of the USMCA’s labor provisions. These demands are in keeping with the party’s longstanding complaint that NAFTA offered Mexico’s low-wage, low-regulation economy a leg up on attracting manufacturers. While the USMCA’s new labor provisions are intended to address this, Democrats argue the agreement lacks teeth in ensuring Mexico holds up to its end of the agreement.

However, creating an enforcement mechanism means going back to the negotiating table, something none of the parties are interested in doing, particularly since it took a great deal of intense negotiation over more than a year to come up with the agreement that’s currently on the table. It’s quite likely Canada and Mexico will demand significant concessions in exchange for a stronger enforcement mechanism, which may negate some of the agreement’s other benefits.

The Trump card

Whether or not the agreement is negotiated is, in some ways, irrelevant. U.S. President Donald Trump has already threatened that if Democrats attempt to quash the USMCA – either before or after a renegotiation of its enforcement provisions – Washington will simply pull the U.S. out of NAFTA, pitting the administration against Congress in a legal battle over trade-agreement decision making that is certain to become a wedge issue in the 2020 presidential campaign. The president recently reiterated his threat to withdraw from NAFTA during a recent interview on the Fox Business Network.

The result would be a return to a trade environment of uncertainty that would surely result in reduced cross-border investment that would adversely impact the economies of all three USMCA countries and potentially stymie Washington’s efforts to negotiate bilateral trade deals with Japan, the European Union and the United Kingdom – all important trade partners.

Forget the whole thing

If the threat to withdraw from NAFTA is simply bluster on the part of the President and ratification of the USMCA ends up locked in a Congressional stalemate, the other alternative is to simply do away with the renegotiated agreement and revert back to the original NAFTA deal. While that would certainly be a viable – and minimally disruptive alternative – the truth is that the USMCA made substantial gains in modernizing free trade in North America, addressing critical issues such as regulatory harmonization, the digital economy and intellectual property protection and host of other aspects that are not addressed in NAFTA. Whether these updates result in tangible gains to GDP and/or employment only time will tell. But at the very least they serve to incentivize those engaged in cross-border trade to continue doing so and perhaps even broaden the scope of their activity. Given that North American trade represents more than a trillion dollars annually, it’s critical to – at the very least – maintain the gains already made over the past 25 years. The USMCA does exactly that and more.

It took very seasoned negotiators and trade experts more than a year of intense talks to arrive at the agreement that’s currently on the table, including the chapters that serve to bring free trade into the 21st century in a fair and equitable manner. It would be irresponsible to do away with these gainful additions in the name of partisanship, and voters would presumably hold their elected representatives to account should they choose to do so.

The best course of action

The responsible and most advantageous thing for Congress to do at this point would be to ratify the USMCA. That’s the opinion of approximately 400 businesses and business associations that are now part of the USMCA Coalition, a collective of like-minded enterprises that believe in the importance of free trade to the U.S. economy and to U.S. jobs, and of which Livingston International is a member.

Given the impressive gains made by the USMCA in fostering an environment of fair and free trade across the continent, and the risks associated with returning to the negotiating table and/or drawing out the ratification of the agreement into the political fray of the 2020 election campaign, it is critical that lawmakers on Capitol Hill make ratification of the new deal a key priority in the coming months.

Failing to do so would put into peril the advantages of free trade on which so many jobs rely, and would serve to reinforce the perception that lawmakers are all too eager to put partisanship ahead of effective representation. 

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.

Five reasons the USMCA won’t be passed easily by Congress

In his recent State of the Union address, U.S. President Donald Trump described the North American Free Trade Agreement (NAFTA) as a “historic trade blunder” and a “catastrophe”. He recounted recent meetings with unemployed Rust Belt workers who have been on the front lines of America’s deindustrialization, imploring Congress to rid America of the NAFTA burden by passing the recently signed United States-Mexico-Canada agreement into law.

Ratification of the agreement, however, is far from certain, and not just because the government is divided along party lines. While it’s true Democrats are leveraging their newfound House majority power to insist on enhancements to the USCMA, there are other factors at play that could stymie the President’s efforts to ratify the trade deal, not least of which is the ongoing row over funding of a border wall, which forced the longest government shutdown in history.

Labor provisions

Perhaps one of the most controversial aspects of the USMCA are the labor provisions outlined in Chapter 23 of the new agreement. The USMA demands that all imports, but particularly automobiles, be manufactured using laborers that have the right to collective bargaining and representation by independent unions. Those labor provisions are critical as much of the impetus behind renegotiating NAFTA was the establishment of a more balanced labor environment between the U.S. and Mexico to minimize the flight of U.S. manufacturers to Mexico where labor wages are only a fraction of those in the U.S. Democrats have noted the Chapter 23 provisions lack enforceability and are unlikely to result in tangible reforms.

The challenge is that putting in place more robust enforcement provisions would require reopening negotiations with Mexico. The governing party in Mexico today is not the same as the one that had negotiated and signed the USMCA. In fact, the conclusion of the negotiations was hastened specifically to ensure the agreement could be signed by then Mexican Prime Minister Enrique Peña Nieto as incoming President Andrés Manuel López Obrador was less inclined to expend his political capital on the new trade deal. Since then, López Obrador’s administration has signalled its support for the USMCA but also that it has no desire to reopen negotiations.

Automotive Content Requirements

Democrats’ demands for stronger labor provision aren’t the only objection to the changes imposed on automotive trade. Republicans have also taken issue with the changes, noting the content requirements are too onerous and against the spirit of open trade.

The content provisions, which require automobiles to have 75% North American content and which prescribe minimums for the use of U.S. steel and aluminum, were the most hotly contested changes in the agreement. While both Canada and Mexico were keen to keep automotive content requirements fairly low and may be receptive to seeing some the changes clawed back, there’s likely little political appetite to reopen negotiations over an issue that was so divisive and which complicated the negotiations from beginning to end.

Section 232 Tariffs on Steel & Aluminum

One of the issues the USMCA agreement failed to address was that of the ongoing steel and aluminum tariffs the Trump administration has imposed on Canada and Mexico, and the associated countermeasures with which each of those countries reciprocated.

Now, Republicans such as Senator Patrick Toomey and Ron Johnson, who chairs the Senate Homeland Security and Governmental Affairs Committee, are echoing the concerns of many U.S. businesses about the impact of the tariffs and stressing their support for the USMCA will be contingent on the tariffs’ repeal. The President, however, has dug in his heels and refused to do away with the tariffs, suggesting instead that he will simply withdraw the U.S. from NAFTA if Congress refuses to ratify the USMCA.

Pharma

Politco Pro recently reported that a group of House Democrats have suggested they cannot support the USMCA if it maintains its current provisions over pharmaceutical intellectual property.

The USMCA increased the period for which drug makers can maintain a patent on high-cost biologics from eight years to 10 years. Democrats fear this will prolong what they see as a period of monopoly for drug makers, enabling them to keep costs high for life-saving drugs.

Environment

The USMCA was an improvement over the 1993 NAFTA agreement in terms of environmental protections. There is specific language about the protection of marine environment and reduction of marine litter and ship pollution, as well as recognition of fishing issues, air quality and the ozone layer. Furthermore, the removal of NAFTA Chapter 11 eliminated the ability for private corporations to sue governments and seek damages for the implementation of environmental laws and regulations that impeded their profits.

But environmental groups and many House Democrats aren’t happy the USMCA excludes mention of climate change and say that – much like the automotive labor provisions – the environment rules lack enforceability and they want to see more definitive language to ensure profit won’t supersede protection.

ITC Report

The aforementioned concerns are only those that have emerged from the text of the agreement itself. Congress has not yet seen the International Trade Commission’s report (the due date for which has been extended to April 19 due to the government shutdown), which will outline the economic impact of the agreement and which could conceivably raise a number of other unforeseen apprehensions.

Only time will tell precisely what sorts of volleys the parties will exchange over the course of the USMCA’s ratification process. What’s certain, however, is that the passing of the USMCA legislation won’t be easy and bi-partisan support may require concessions on the part of an administration that has hitherto been able to govern unimpeded on the trade file.

 

David Rish is president of Global Trade Management at customs brokerage, freight forwarding and trade consulting firm Livingston International. He can be reached at gtmleader@livingstonintl.com.