How Canada gained from America’s internal battle over NAFTA
Canada, Mexico and the United States signed a modified version of the North American free trade pact Tuesday, just hours after it won the crucial endorsement of congressional Democrats in Washington.
Deputy Prime Minister Chrystia Freeland joined U.S. Trade Representative Robert Lighthizer and Mexico’s lead negotiator, Jesus Seade, in Mexico City to sign the new deal, designed to bridge the impasse between the White House and Democrats after months of wrangling over concerns over Mexican labour, pharmaceutical provisions and other issues.
“This has been a long, arduous and, at times, fraught negotiation,” Freeland said. “We made it to the finish line because we learned how to work together.”
The changes, which have won the approval of the powerful AFL-CIO federation of unions and are expected to be mostly neutral for Canada, came after last-minute talks as Lighthizer pushes to get the pact ratified in his country.
Earlier, in an extraordinary morning in Washington, House Speaker Nancy Pelosi and Rep. Richard Neal, chairman of the powerful U.S. House of Representatives’ Ways and Means Committee, announced the bipartisan trade agreement in the same hour that Democrats unveiled two articles of impeachment against President Donald Trump.
“Next week we could impeach a president and pass a trade deal that actually has the support of unions,” said international trade lawyer Dan Uzcjo. “So heads are spinning.”
U.S. ratification of the deal updating the 25-year-old NAFTA would mark a major legislative victory for Trump heading into the 2020 presidential elections. At the same time, Democrats want to prove that they can simultaneously legislate while pursuing Trump’s impeachment.
House Democrats are poised to vote on the trade pact next week, but it will still need to pass in the Republican-controlled U.S. Senate. Majority Leader Mitch McConnell said Tuesday the Senate won’t take up the deal until after it finishes with the impeachment trial next year.
It must also be ratified by Parliament in Canada.
After years of uncertainty it appears a modernized and enhanced North American trade agreement is finally ready to go before Parliament
Lighthizer hailed the new pact as “the best trade agreement in history.”
“It’s going to make North America richer. It’s going to make Canada richer. It’s going to make Mexico richer,” he said, adding a nod to Trump as a “truly historic leader.”
Pelosi took pains to emphasize Democrats’ role in reshaping the original deal — signed by leaders in Buenos Aires last fall — into something “infinitely better.”
“We came a long way from what he originally proposed,” she said. “We were not going to accept the original deal. That’s what it came down to. It takes a while especially when you’re starting with a non-starter and that’s what the Trump administration gave us, a non-starter.”
Indeed, the deal was endorsed by Richard Trumka, president of the powerful AFL-CIO federation of unions.
“The AFL to my knowledge has never endorsed a trade agreement,” said Kimberly Ann Elliott, a Washington trade policy analyst. “I did not think they would come out and do it with this. That is remarkable.”
Final text of the agreement has yet to be released. But a Democrat backgrounder says the new pact cuts a provision that granted 10 years of protection from generic competitors to a new class of drugs called biologics — an effort to fight escalating prescription drug prices. It creates stronger rules on the environment and removes a loophole that allowed parties to engage in “panel blocking,” the practice in which countries stymie the formation of dispute settlement panels by refusing to appoint new judges.
But for many Democrats the key stumbling block was how to ensure a promised overhaul of Mexican labour reforms to close the gap in wages and rights between workers in the U.S. and Mexico. U.S. trade deals have been viewed as toothless on reform, Elliott said.
“The U.S. would work with countries to impose labour laws but it never happened,” she said. “Labour wanted something a lot stronger this time.”
Mexico resisted an initial proposal for U.S. inspectors to enter its factories. The new deal pledges to create “inter-agency committees” to monitor labour rights in the country. Labour “attaches” will provide updates on reforms and a rapid response system will allow the U.S. to impose penalties on Mexican factories that violate workers’ rights.
It’s going to make North America richer. It’s going to make Canada richer. It’s going to make Mexico richer
For the most part, the changes are likely to be neutral or even beneficial for Canada, said international trade lawyer Mark Warner. Canada had sought an end to panel blocking and resisted changes in biologics provisions. The one provision that could cause problems for Canada calls for violations of environmental provisions to be viewed as trade violations, he said.
“But for the most part, Canada wasn’t a factor in this,” Warner said. “On labour it was a U.S.-Mexico story. On pharma, it was a Democrat story. This was an internal American debate. It just so happens Canada benefits from it.”
In a key win for unions and the American steel industry, the new deal also includes a last minute demand from the U.S. requiring all the steel to be “melted and poured” in North America. Mexico initially resisted this provision but ultimately conceded provided the rule takes effect at least seven years after ratification. A parallel request on aluminum will remain under review.
That exclusion came as a disappointment to the Canadian aluminum industry since it “allows Mexico to continue to import metal from China and other parts of the world, significantly affecting the balance of the North American automotive value chain,” the Aluminum Association of Canada said.
“The advantage thus conferred to Mexico makes it more or less China’s North American backyard to dispose of the products of its overcapacity, thereby generating the gradual relocation of North American transformers to Mexico,” said association president Jean Simard.
Freeland said Canadian aluminum firms, most of which are located in Quebec, will still enjoy tariff-free access to the U.S. under NAFTA. In fact, Canada is the only major aluminum-producing nation to enjoy that access, she said.
The agreement was praised by a number of Canadian industry associations and unions, who urged its swift ratification.
“We look forward to reviewing the text in detail, but after years of uncertainty it appears a modernized and enhanced North American trade agreement is finally ready to go before Parliament,” said Goldy Hyder, president and CEO of the Business Council of Canada. “Trade with the United States and Mexico supports thousands of businesses and millions of high-value jobs in communities across Canada. We call on MPs from all parties to make the ratification and implementation of this agreement a top priority.”
Unifor national president Jerry Dias said he was pleased by the deal’s consideration of workers.
“Is it perfect? God no,” he said. “Is it better than the original (NAFTA)? Absolutely.”