House Approves Trump’s USMCA Trade Deal

December 19, 2019 Updated: December 27, 2019
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WASHINGTON—The U.S. House of Representatives approved the new trade pact with Canada and Mexico that supplants the 25-year-old North American Free Trade Agreement (NAFTA) on Dec. 19 in a 385 to 41 vote.

The U.S.–Mexico–Canada Agreement (USMCA) has strong provisions that serve as a model for future U.S. trade agreements, providing advanced protection for American workers, manufacturers, and farmers.

The agreement has stronger rules of origin for autos and automobile parts that exceed those of both the original NAFTA and the Trans-Pacific Partnership agreement, which President Donald Trump exited.

Under the new deal, 75 percent of auto content must come from North America, up from the original threshold of 62.5 percent. The higher threshold will keep more parts from other regions out, while boosting production and jobs in the region.

The rules also incentivize the use of high-wage manufacturing labor, which will help provide a level playing field for American producers and workers. The deal is expected to boost production in the United States and Canada, which suffered from lost jobs to Mexico for years.

U.S. dairy farmers who have long complained about Canada’s high market barriers also received some benefit from the deal. In addition to the current exports of dairy products, Canada will provide “new tariff rate quotas” exclusively for the United States. The agreement provides market access gains for American dairy products, including cheese, milk, butter, yogurt, and ice cream.

The deal also establishes modern digital trade rules that have significant implications for the U.S. technology sector.

The United States, Canada, and Mexico agreed on the new trade deal in October 2018 after a lengthy and intense negotiation process, and the countries’ leaders signed it on Nov. 30, 2018. The new pact has to be ratified by legislatures in all three countries to take effect.

Bipartisan Pressure

For the past several months, House Speaker Nancy Pelosi (D-Calif.) had faced growing bipartisan pressure within Congress to bring the agreement to the House floor before the end of the year. Business groups and farmers throughout the country had also raised concerns about delays in ratifying the agreement.

Trump and Republican lawmakers accused Pelosi of holding the agreement for more than a year.

“It’s just a shame Speaker Pelosi held it up for so long,” Ways and Means Committee ranking member Kevin Brady (R-Texas) said Dec. 19 in his opening statement for floor debate on USMCA.

Democrats, who control the House, had said they weren’t satisfied with the USMCA, calling for stronger enforcement provisions. After months of negotiations with the Trump administration, House Democrats gave the green light on Dec. 10, paving the way for a House vote before the upcoming congressional recess.

Pelosi said on Dec. 10 that both sides ironed out their differences on the agreement and made some changes in the areas of enforcement, workers, environment, and prescription drugs. After the announcement, the trade deputies of the three countries signed the modifications to the USMCA in Mexico City.

Once approved by Senate, the deal will replace the old trade agreement, NAFTA. President Donald Trump dubbed NAFTA the “worst trade deal ever made.”

However, the deal may not be able to clear the Senate before the end of 2019. Majority Leader Mitch McConnell (R-Ky.) said last week that the Senate wouldn’t take up the USMCA before the congressional recess. He added that the Senate was unlikely to vote on the deal until after the expected impeachment trial for Trump.

Modified Deal

House Democrats claimed that they made “transformative changes” to the USMCA in the areas of enforcement, workers, environment, and prescription drugs.

House Ways and Means Committee Chairman Richard Neal (D-Mass.), who was the lead negotiator for House Democrats, said the USMCA would serve as a model for future U.S. trade agreements.

“Thanks to the hard work of House Democrats, the transformed USMCA agreement closes important loopholes and enables the United States to ensure our trading partners live up to their commitments,” he wrote Dec. 19 on Twitter.

Business groups including the U.S. Chamber of Commerce, however, expressed their disappointment over the changes to the USMCA agreement, particularly the removal of biologics provisions that protect American medical innovation.

The original USMCA had granted 10 years of regulatory data protection for biologics inventions. Under the new provisions, however, drug makers will receive only five years of protection in Mexico and eight years of protection in Canada.

“This matters because the European Union offered 10 years of data exclusivity,” said Stephen Ezell, vice president of global innovation policy at the Washington-based think tank Information Technology and Innovation Foundation.

“That would have put the North American life sciences innovation ecosystem on par with the European one. China has announced that it’s going to provide 12 years of data exclusivity. So in essence, our negotiators have not just settled for a lower bar, but no bar, when it comes to this very important underpinning element of life sciences innovation,” he added.

House Democrats opposed the original provision over concerns that it would inflate drug prices. The U.S. laws grant biologics 12 years of protection in the United States. Critics argue that the 10-year provision in the agreement would have increased the protection in Canada and Mexico.

“It really represents a missed opportunity for us,” Ezell said.

Follow Emel on Twitter: @mlakan