The House passage of President Trump’s United States-Mexico-Canada Agreement on trade was bipartisan, but the praise wasn’t universal. Like most trade deals passed by Capitol Hill, some groups came out winners, while others were disappointed.
The winners include technology businesses and manufacturers, some farm groups, and unions. The pharmaceutical industry and environmental groups were among the most disappointed.
“USMCA is a perfect example of how trade policy that is focused on managing trade rather than liberalizing it ends up picking winners and losers by allowing the voice of some groups to have greater traction in negotiations than others,” said Inu Manak, trade policy expert for the free-market Cato Institute.
In the case of USMCA, it was as much a matter of what the deal omits as what it says. USMCA is largely an update of the 1993 North American Free Trade Agreement and will have a marginal impact on the economy, according to the International Trade Commission, a nonpartisan government agency. For many businesses, simply ensuring that the underlying free trade provisions of NAFTA remain intact, despite Trump’s earlier threat to pull the U.S. out of the deal, was the goal. Only a few who wanted new provisions grafted in succeeded. Others described the deal as a missed opportunity.
USMCA was a victory for the technology sector, which received protections for digital trade, liability protections, prohibitions on forced data localization, and enhanced copyright provisions. “The landmark agreement represents a key step forward for U.S. leadership in innovation and digital trade, offering first-of-its-kind, cutting-edge digital trade provisions that recognize the reality of the 21st-century economy,” said Jason Oxman, president of the Information Technology Industry Council.
Manufacturers praised the deal for the same reasons, since the high-tech language applies to much of what they do. “The agreement promises stronger intellectual property rules to protect manufacturing inventions, setting new and improved standards for the digital economy,” said Linda Dempsey, vice president for international affairs at the National Association of Manufacturers.
The situation with the auto industry was more complicated. USMCA requires that 75% of an automobile’s parts be made in North America to be duty-free, up from 62.5%, and that at least 40% be built by people making at least $16 an hour. That will cost the industry $3 billion in additional tariffs over the next decade, the Congressional Budget Office estimated. The Alliance of Automobile Manufacturers, which represents foreign and domestic companies, issued a statement that did not applaud or condemn the deal, and a representative did not respond to a request for clarification. However, domestic manufacturers will likely benefit. For the auto industry in the U.S., USMCA may be a boost, as Mexico will become less competitive.
Unions were able to leverage their support within the Democratic Party to get the labor rights and factory inspections language they wanted. These provisions will limit Mexico’s competitive advantage in labor costs and give businesses less reason to locate there. “There is no denying that the trade rules in America will now be fairer because of our hard work and perseverance,” said AFL-CIO President Richard Trumka.
However, the UAW, an AFL-CIO coalition member, was less impressed despite the auto provisions and labor rights language. “Some supporters of USMCA highlight the higher auto rule of origin standards as good for U.S. workers but do not note the higher standards could mostly be satisfied by shifting production from Eastern Europe and Asia to Mexico, not to the United States,” said UAW President Rory Gamble.
The dairy industry praised the deal for opening up Canada to more exports. Farmers for Free Trade, an ad hoc coalition group, applauded the deal for simply doing no harm. “USMCA continues duty-free access to Canada and Mexico which has been a bedrock of U.S. ag export growth for over 25 years,” the group said.
Some farm groups that hoped for language protecting them from competition were nevertheless disappointed. “This agreement will not solve the failures of NAFTA with regards to the seasonal competition of agricultural produce that caused our fruit and vegetable farmers to lose a large share of the U.S. market to Mexican producers,” said Florida Republican Ted Yoho, explaining his "no" vote.
The U.S. Cattlemen’s Association said that they were "disheartened" that USMCA didn't include special rules covering country-of-origin labeling for beef.
Being happy that current trade will continue unimpeded was a common refrain from many trade groups. “The agreement provides certainty for producers and will be vital in building upon the sustained growth the spirits industry has seen since the elimination of tariffs under NAFTA,” said Distilled Spirits Council President Chris Swonger.
The pharmaceutical industry had managed to get protections for biologic drugs included in the initial deal, but the White House dropped the provisions late in the negotiations to secure a deal with Democrats. “We cannot support abandoning provisions that protect American companies and raise standards abroad,” said PhRMA President Stephen Ubl.
Environmentalists also called the deal a missed opportunity. “Given the urgency of climate change and the scale of international cooperation needed to address it, any new trade agreement must include climate provisions and a pledge to adhere to the Paris accord,” said Jake Schmidt, managing director of the International Program at the Natural Resources Defense Council.
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Tech, unions, and dairy among the biggest winners with USMCA - Washington Examiner
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