Now all three countries need to ratify the trade pact — including a soon-to-be divided US Congress.
The United States, Mexico, and Canada have signed the USMCA, the trade deal that replaces NAFTA.
The leaders of all three countries — US President Donald Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau — inked the pact Friday on the sidelines of the G20 summit in Buenos Aires, Argentina.
“This new agreement will ensure a future of prosperity and innovation for Mexico, Canada, and the United States,” Trump said Friday during brief remarks ahead of the signing.
The relatively low-key ceremony comes after months of high-stakes negotiations over USMCA, or the United States-Mexico-Canada Agreement. (Canada is reportedly calling it CUSMA, and Mexico is also putting itself first, though in Spanish it’s TMEUC.)
The United States and Mexico reached a bilateral agreement in August, and threatened to move ahead without Canada. But after some tense back-and-forth, Canada and the US broke through the impasse in the final days before the September 30 deadline.
The USMCA is essentially NAFTA 2.0, an updated version of the nearly 25-year-old trade treaty with some major changes on cars and new environmental and labor standards. Most critically, the renegotiation preserved the multibillion-dollar trilateral trade pact, after Trump threatened to tear up NAFTA altogether.
But USMCA is not a done deal, and there are still some roadblocks to its implementation.
Up until the eve of the signing, Canada and the US were reportedly still at odds about some of the language in the agreement, and were engaged in some last-minute negotiations. Canada and Mexico also wanted steel and aluminum tariffs lifted by the time they signed USMCA. That hasn’t happened so far, and it’s apparently dampened the mood.
But the biggest issue is a domestic one. All three countries still need to ratify the deal. Trump faces a much more difficult task getting Congress to approve the USMCA now that the Democrats have retaken the House of Representatives. Trump will now need bipartisan support to get the deal passed, and some Democrats have objected to elements of the USMCA.
The USMCA is signed, mostly sealed, but definitely not delivered
There’s a big question looming over the deal now: Will the House Democrats go for it?
Senate Majority Leader Mitch McConnell previously said approval of the USMCA was a “next year” issue, and it was unrealistic to take up the agreement during the lame-duck session. That means the new, divided Congress will take up the trade deal in 2019.
Democrats, newly empowered with their House majority, have been grumbling about USMCA’s environmental protections and whether or not the deal does enough to protect American workers. The USMCA is a modest improvement over NAFTA when it comes to labor, though questions remain about some of the enforcement mechanisms.
“The jury is still out as to whether this deal meets my standard for a better deal for American workers,” said Rep. Bill Pascrell (D-NJ) earlier this month.
Labor unions have also been hesitant about USMCA, with some, such as the AFL-CIO, expressing reservations that the new labor protections don’t go far enough and lack strict enforcement rules.
Duncan Wood, director of the Wilson Center’s Mexico Institute, told me that the Democrats are likely to demand changes, or at least make the ratification process difficult. “We’ve still got months of uncertainty,” he said earlier this week.
Democrats also don’t have any easy way to get changes or modifications to the USMCA. The US renegotiated NAFTA under the Trade Promotion Authority (TPA), a law which empowers the president to negotiate trade deals and allows Congress to “fast-track” the agreement with an up-or-down vote. This doesn’t leave room for the House or Senate to make changes or introduce amendments.
The Trump administration was very creative in their adherence to the TPA during the NAFTA negotiations: It notified Congress of a deal with Mexico, saying it would add Canada later. But if Democrats demand major tweaks, they’d likely have to pressure the administration to reach some sort of side-agreement on labor or environmental rules.
None of this is likely to be sorted out soon. Once the deal is signed, the US International Trade Commission will study the pact and issue a report on the effects of the USMCA on the economy, including its impact on different sectors and US consumers. That report is due 105 days after the official signing, so probably sometime in March. It’s likely Congress will wait to even consider the USMCA until that analysis is done.
The Democrats aren’t the only ones with concerns about USMCA. But wooing House Democrats will be the White House’s biggest challenge.
So far, Trump seems confident. “It’s been so well-reviewed, I don’t expect to have very much of a problem.” Trump said Friday at the signing.
Democrats are likely not eager to give Trump a win, though they might be able to leverage their support for USMCA to get concessions out of the White House. And even if they’re likely to put up some resistance, bipartisan support is likely within reach — at some point. That’s mostly because the alternatives are worse: a zombie NAFTA 1.0, or a president who gets angry enough that he decides to tear up NAFTA altogether.
“That lights a fire under the US Congress to get the new agreement ratified,” Wood said.
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