US hurdles further complicate USMCA ratification

The renegotiated North American trade pact is popular in the U.S., Mexico and Canada, but the Trump administration and U.S. lawmakers are making ratification increasingly difficult with complications that threaten to derail the process.

When Jesús Seade, Mexico’s top North American negotiator, met with reporters last week, it was clear he’d been hoping for a calm discussion about progress and optimism in implementing the U.S.-Mexico-Canada Agreement, or USMCA. South of the border, they call it the Mexico United States Canada Treaty, or T-MEC for short.

What Seade got instead were frantic questions about newly threatened auto tariffs and demands to reopen negotiations on labor and pharmaceutical issues. Shortly before Seade’s press conference, President Donald Trump lobbed a new threat to hit Mexico with a 25 percent tariff on cars and car parts if it did not stop the flow of migrants and illegal drugs to the U.S.

“We’re going to give them a one-year warning and if the drugs don’t stop or largely stop, we’re going to put tariffs on Mexico and products, particularly cars,” Trump said Thursday. “And if that doesn’t stop the drugs, we close the border.”

Seade stressed Mexico is trying to keep all of these issues — immigration, narcotics trafficking, and U.S. tariffs — separate from the work to ratify the USMCA, but that’s proving to be difficult.

“What I want to underline is that we want to cooperate,” Seade said.

Tariffs (and more tariffs) threaten USMCA

Trump has not unleashed the auto tariffs yet, but he is still unwilling to lift his Section 232 tariffs on steel and aluminum from Mexico and Canada, and that is becoming a major impediment to USMCA ratification.

“From the Mexican point of view, I can tell you we will never dream of completing the USMCA … if that problem has not been resolved,” Seade said about the steel and aluminum tariffs.

And that’s what staunch pro-USMCA lawmakers like Sen. Chuck Grassley, R-Iowa, are worried about.

“We need to focus on creating opportunities instead of erecting barriers,” Grassley said in a Senate floor speech Monday. Mexico has threatened to revise its retaliatory tariffs on the U.S. (Now they are on pork, cheese, potatoes and apples), and that’s exactly what Canada is doing, Canadian Ambassador David MacNaughton told reporters Monday at a meeting of the North American Agricultural Journalists.

"We will be refreshing the list shortly," he said, "though that will be more out of sorrow than out of anger." 

Now Canada’s retaliatory tariffs that impact the U.S. ag sector are on value-added products like ketchup and yogurt, but the unknown new mix of products and commodities is already concerning ag groups and farm state senators. Grassley, who has been vocal publicly about his insistence that Trump lift the metals tariffs on Canada and Mexico, beseeched Canada not to penalize Iowa’s ag exports.

“I’d like to see a resolution with Canada and Mexico on steel and aluminum tariffs,” Grassley said. “I urge President Trump to lift the 232 tariffs so we can forge ahead with United States-Mexico-Canada Agreement and eliminate the uncertainty in the North American market.”

But Trump’s new insistence that he is willing to hit Mexico with automobile tariffs has introduced a new level of uncertainty. Even as the Trump administration presses Congress to ratify USMCA, the president is threatening to act against a USMCA agreement that would largely exempt Mexico from the car and car part tariffs.

“This will supersede USMCA,” Trump said Friday when asked about the automobile tariff exemptions. “USMCA is a great deal and it's very good for Mexico, but this will supersede USMCA.”

That makes no sense, but the threat is presents to USMCA and future trade pacts is even more significant, said Joe Glauber, a senior research fellow at the International Food Policy Research Institute, former chief agriculture negotiator for the U.S. Trade Representative and former USDA chief economist, told Agri-Pulse.

“If you’re going to rip up agreements as soon as they’re made, you wonder why anybody would want to do a deal with you,” Glauber said.

Concerns over Mexico’s labor reform

Mexico’s legislature is on track this month to approve broad labor reforms that the country agreed to during USMCA negotiations and that will be key for many U.S. lawmakers weighing their support for the trade pact.

“The expectation is that it will be done this month, in April,” said Seade, who met with freshman House Democrats as well as the Hispanic Caucus last week to reassure them that Mexico’s labor standards will improve significantly. “I’m really convinced, from the Mexican point of view … the main part of the agreement is the labor chapter. It is very far reaching and … I’m not uncomfortable with the attention to that.”

Mexico’s apparent enthusiasm under newly elected President Andrés Manuel López Obrador is welcome to lawmakers like Rep. Jesús “Chuy” García, D-Ill., but he and others are also seeking some method of making sure Mexico truly enacts new legislation.

“I am encouraged by the Mexican government’s intention to move forward with labor reforms and wage increases for Mexican workers,” Garcia told Agri-Pulse. “We can and should insist that Mexican workers are able to join unions and participate freely in collective bargaining agreements, and we must be sure that Mexico’s new labor standards are enforceable.”

That’s a position also held by House Speaker Nancy Pelosi.

“I’m hopeful that we can get a trade agreement, but it has to be one that really works,” the California Democrat told reporters Thursday. “I want to see … enforcement language.”

Mexico’s history of low wages and lack of meaningful unions to protect workers’ rights are blamed for U.S. companies moving production facilities south of the border. That’s why provisions in USMCA that require Mexico to, among other things, scrap government-supported unions and allow workers to vote on their own representation.

Enforcement is vitally important, Chairman of the House Ways and Means Committee Richard Neal told U.S. Trade Representative Robert Lighthizer in a letter dated Tuesday, because many lawmakers remember empty pledges to improve labor and environment standards in the original North American Free Trade Agreement.

“NAFTA is blamed for the further loss of American manufacturing jobs, especially to Mexico where wages remain unfairly low even today,” Neal wrote. “NAFTA became a four-letter word in many communities and those scars are still deeply felt.” 

Sens. Ron Wyden, D-Ore., and Sherrod Brown, D-Ohio, are two lawmakers who are trying to address enforcement concerns. Together, they have developed legislation that would allow U.S. and Mexican government officials to audit and inspect factories that are suspected of breaking the new labor laws that are expected to be approved this month.

“Updating NAFTA will only help American workers if the deal can be enforced,” Wyden said in a statement provided to Agri-Pulse. “Senator Brown and I have a plan to help Mexico live up to its commitments when it comes to higher labor standards.”

But Democrats have more concerns than just labor standards. A growing number are also opposed to a USMCA provision under which Mexico and Canada agree to extend their patents for biologic pharmaceutical drugs to 10 years. That, some Democrats say, will drive up prescription drug prices.

Neal warned Lighthizer Tuesday that he and the Trump administration will be hearing much more on these concerns in the coming days.

“You should not be surprised by the concerns,” Neal says. “Strong labor standards. Strong environmental standards. Mechanisms inside the agreement to ensure that those provisions (and other provisions) are enforceable and will make a difference. Terms that are favorable to Americans’ access to affordable health care and preserve Congress’s space to make future policy changes.” 

For more news, go to www.Agri-Pulse.com.