Pence: USMCA Will Strengthen President’s Hand in China Talks

September 17, 2019 Updated: September 17, 2019

WASHINGTON—Vice President Mike Pence pressed Democrats to pass the new free-trade agreement with Canada and Mexico, saying that approval of the deal by Congress would strengthen President Donald Trump’s hand in trade negotiations with China.

Speaking at the Heritage Foundation on Sept. 17, Pence said that congressional approval of the United States–Mexico–Canada Agreement (USMCA) is “absolutely vital.”

“The USMCA is so advanced, so comprehensive, that it may well serve as a template, a model trade agreement for future trade agreements in the decades ahead, whether with the United Kingdom, Japan, the European Union, or even China,” Pence said, noting that “passing the USMCA will also strengthen the president’s hand in negotiations” with Beijing.

The Trump administration on Sept. 11 sent the latest responses to House Speaker Nancy Pelosi (D-Calif.) to address concerns raised by Democrats about the USMCA. Democrats, who control the House, demanded some changes to the provisions of the agreement and made it clear that they wouldn’t vote for the pact unless the issues were resolved.

The Trump administration and House Democrats formed a trade-working group in June to tackle these issues. The group held meetings with U.S. Trade Representative Robert Lighthizer and his team throughout the summer in an effort to resolve differences.

“The working group is in the process of reviewing the responses” from the U.S. Trade Representative, according to an email from the office of House Ways and Means Chairman Richard Neal (D-Mass.), who leads the working group.

Democrats have called for stronger labor and environmental provisions in the new trade agreement, specifically raising concerns about Mexico’s ability to implement labor standards. In addition, they’ve questioned pharmaceutical provisions, which they argue would raise the prices of crucial drugs.

Once approved by the Congress, the USMCA will replace the 26-year-old North American Free Trade Agreement (NAFTA).

Changes to Manufacturing

The USMCA will raise the United States’ real gross domestic product by $68.2 billion, or 0.35 percent, and create 176,000 new jobs, according to a report by the U.S. International Trade Commission (ITC).

The ITC study also said that the agreement would likely have a positive impact on all U.S. sectors, but manufacturing would have the largest percentage gains in output, exports, wages, and employment.

The USMCA has strong labor provisions, which makes the deal an important milestone for international trade, according to trade experts.

Under the new pact, 75 percent of auto content must come from North America, up from the original threshold of about 63 percent. The higher threshold will help boost production and employment in the sector.

The agreement also incentivizes the use of high-wage labor in auto manufacturing, requiring 40 percent of each car and 45 percent of each truck to be produced by employees making at least $16 an hour, in order to qualify for duty-free treatment. This requirement is also expected to boost auto production in the United States.

Another study by the Office of the U.S. Trade Representative found that these provisions would boost automotive manufacturing investments in the United States by $34 billion over the next five years, adding nearly 76,000 new jobs.

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

“The brand new digital trade chapter of the USMCA contains the strongest language on digital trade of any international agreement in history,” Pence said.

The agreement contains comprehensive rules to protect the free flow of data and prohibit parties from enacting barriers to data flows. The deal also has a clause that prevents trading partners from entering a free-trade deal with a non-market country, allowing them to terminate the agreement on six months notice.

This clause “effectively provides the United States a veto over any free-trade deal the other two partners might wish to negotiate with a listed ‘non-market country,’ such as China,” David Kilgour, former Canadian secretary of state for Asia-Pacific, wrote in an op-ed for The Epoch Times.

After his election, Trump followed through on his campaign promises and began ending what he called “broken trade deals.” He labeled NAFTA “the worst trade deal in the history of the country.”

He also made it clear that he preferred bilateral trade deals to regional or multilateral agreements, and this marked a fundamental shift in America’s trade policy.

Pence touted the new trade pact, saying that it was a win for U.S. workers and companies.

“I’m proud to report the president has done his job. Canada and Mexico are doing their job. Now, we need Congress to do its job and pass the USMCA.”

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