U.S. President Donald Trump got the biggest win of his administration on trade policy last week by reaching an agreement with Speaker of the House Nancy Pelosi on terms for the U.S.-Mexico-Canada Agreement (USMCA), the pact that will replace the North American Free Trade Agreement (NAFTA), which governs more than $1.2 trillion of trade among the three countries. Counterintuitively, it may have taken the passions generated by the impeachment process to get USMCA through Congress. The accord is far less than advertised, although all involved agree that it is an improvement on its predecessor. Most importantly, it provides stability and certainty for businesses and that alone is reason to applaud the deal.
Trump called NAFTA, adopted 25 years ago, "the worst trade deal ever negotiated," blaming it for the losses of millions of American jobs during that quarter century. He promised to pull the United States out if a new pact could not be agreed. That threat, along with the imposition of tariffs, spurred the governments of Canada and Mexico to come to the table and they concluded a new accord after a little over a year of talks. Agreements among the three governments are not the end of the negotiating process, however. U.S. law requires that trade deals be ratified by Congress, so every administration must ensure that its deals enjoy majority support from the legislature. In essence, a second set of negotiations is required, one that is internal to the U.S. political system.
Democrats demanded changes to the draft signed by the three governments, and those negotiations — between the Trump administration and Democratic legislators — were concluded last week. The Democrats' chief concern was ensuring that the new deal raised labor standards, to prevent jobs fleeing to Mexico to exploit lower wages and worse working conditions. The revised deal also strengthened environmental protections — again to prevent a race to the bottom — and opened the Canadian dairy market to U.S. products. It reduced the amount of time that certain biologic drugs enjoy intellectual property protection, improves protection of other forms of intellectual property, and tightens rules on currency manipulation to prevent governments from using that tool to help businesses maintain competitiveness.