NAFTA 2.0: Do Democrats Hand Trump a Win?

By: David Adams

When President Trump heads to the G-20 summit this week, he is expected to sign the United States, Mexico, Canada Agreement (USMCA) – a signature that will start many “clocks” ticking under Trade Promotion Authority (TPA).

The first alarm to sound will be in 60 days when the administration must send a list of US laws that need to be amended in order to implement the new agreement. This list will also form the basis of legislation that Congress will likely be asked to vote on later in the process. The President’s signature also kicks off a 105-day review process which results in a report from the International Trade Commission (ITC) on the impact of the new agreement on the US economy. The timelines for both the list and ITC report, coupled with the fact that both Senate Majority Leader Mitch McConnell (R-KY) and outgoing House Speaker Paul Ryan (R-WI) have said publicly that there will be no vote on USMCA during the lame duck session, drop this agreement squarely in the lap of the incoming 116thCongress.

Campaign Promise v. Majority Rule 

Trade deals are not high on the incoming House Democratic majority’s list of priorities. In fact, they’re not on the list at all. But President Trump is determined to deliver on this signature campaign promise – a renegotiated North American Free Trade Agreement (NAFTA). That determination will force the Democrats to deal with USMCA one way or another. 

Incoming House Ways and Means Committee Chairman Richard Neal (D-MA) has already indicated that support for the USMCA will be “a very high bar” and traditional Democratic constituencies are lining up against the agreement. Environmental groups, including both Greenpeace and the Sierra Club, have come out against the deal and Leo Gerard, president of the United Steelworkers and chairman of the Office of the United States Trade Representative’s (USTR) Labor Advisory Committee, said that more needs to be done to ensure that labor provisions are enforceable. He noted that while the auto content and minimum wage requirements for Mexican manufacturers are welcome, they remain insufficient to prevent further outsourcing of US jobs.

Bottom line: Democrats find themselves in a difficult spot on an issue they would prefer not to touch for it will force them to attempt to satisfy strong components of their base while wrangling the votes needed to get the deal to 218. That may be a tall order for Democrats now that 40 members of the House Freedom Caucus have come out against the gender and sexual orientation workplace discrimination rules in the deal.

And then there is this – do Democrats really want to hand President Trump a victory at all? They may not have much choice.

History Lesson

TPA sets out a rigorous schedule for congressional consideration – but remember, it is a congressional process and the thing about Congress is, well, it makes its own rules. In 2008, President Bush had a trade deal with Colombia ready to submit to the Congress under TPA, but then-Speaker Nancy Pelosi (D-CA) had other ideas. She asked the House to suspend TPA which the House did on a narrow vote. The Colombia agreement promptly stalled and resulted in delays on deals with Korea and Panama as well. It took three years and a change in party control of the House before the Colombia, Korea and Panama deals where considered.

Should she reclaim her role as Speaker, Pelosi could employ a similar move here to delay consideration – but this time it’s tricky. Currently, there is already a trade agreement with Mexico and Canada in place. While having this backstop may bring some comfort, it is conceivable that President Trump will simply announce his intent to withdraw from NAFTA setting up a situation where there would be no agreement at all if Congress failed to act on the USMCA. Neither side will likely want to be blamed for that outcome.

A likelier outcome will be negotiations between Democrats and the Trump Administration in an attempt to address key concerns that will satisfy enough Democrats to move the agreement forward. There is precedent for re-opening a negotiated agreement; President Obama did that with the Korea agreement in 2009. However, Canada and Mexico would have to agree to that, too. Canada has said that any additional concerns should be addressed in side agreements which the AFL-CIO has already rejected as insufficient. In the end, there are a significant number of freshman Democrats from agricultural or manufacturing districts who might see supporting the USMCA as good politics for them back home and a way to bolster their bi-partisan credentials with an eye towards 2020.

The Countdown

Buckle up – next year will be a bumpy ride on trade. But then again, when has this subject ever been easy? For industries or organizations with trade interests, the clock is ticking to understand how USMCA can impact your bottom line and ensure that your interests are protected whether Congress acts or not.   Cogent’s team of senior strategists understand the policies and politics at play when it comes to trade and are here to provide guidance before time runs out.       

David Adams brings to Cogent clients an invaluable combination of legislative and foreign policy expertise. David served as Assistant Secretary of State for Legislative Affairs and as Deputy Assistant Secretary for House Affairs to Secretary of State Hillary Clinton. He also has a distinguished record as staff director for the House Foreign Affairs Subcommittee on Middle East and South Asia and as professional staff for the Committee on International Relations. For David’s complete bio, click here