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.