/USMCA: Ratification is getting there but ‘difficult issues’ remain

USMCA: Ratification is getting there but ‘difficult issues’ remain

The push to ratify a new North American trade pact is “getting there” Mexico’s top negotiator says, though some “difficult issues” remain as U.S. Democrats continue to insist on stronger labour enforcement.

Jesús Seade, Mexican Undersecretary for North America, met with Prime Minister Justin Trudeau and Deputy Prime Minister Chrystia Freeland in Ottawa Friday, as the political window to approve the trilateral pact this year slowly closes.

The Trump administration has spent months negotiating changes designed to woo skeptical Democrats even as a series of obstacles — including a government shutdown, an investigation into Russian interference in the 2016 election and an ongoing impeachment inquiry — threatened to derail the process.

United States Trade Representative Robert Lighthizer must satisfy Democrat concerns while holding on to the support of Mexico and Canada, as well as Senate Republicans.

“If the amendments suggested are fine, are acceptable, are improvements, then there’s no reason why we should not be shaking hands next week,” Seade told reporters at the Mexican Embassy.

Seade’s comments followed those of Trudeau, who told reporters that there was “a little more work to do,” on the trilateral pact.

“Canada is extremely supportive of Mexico’s steps toward labour reforms,” he said.

The Ottawa talks followed a flurry of high-level meetings in Washington earlier in the week involving Seade, Freeland and Lighthizer.

The $1 trillion North American Free trade pact — dubbed the U.S.- Mexico-Canada Agreement, or USMCA, by U.S. President Donald Trump — was signed by leaders in Buenos Aires last fall. However, it still requires ratification by all three countries before it can take effect. Mexico has already ratified the deal. Canada has been waiting for it to be approved in the U.S, where the Democrats controlling Congress have insisted on changes to pharmaceutical provisions and tougher enforcement of Mexican labour reforms.

The question of just how to enforce those reforms has yet to be answered. So far, Mexico has resisted a push by Democrats to allow U.S. officials to inspect Mexican workplaces in order to ensure compliance.

In general, my sentiment is that this is going to be an improvement, but there are some difficult issues I have to discuss with stakeholders in Mexico.

Jesús Seade, Mexico’s NAFTA negotiator

The proposal to allow U.S. inspectors is “no longer a red line but an engraving on the floor” for Mexico, Seade said Friday.

“We would not accept these lone ranger inspectors being called and 12 hours later they dash to see a factory. That’s not fun.”

Still Seade believes something will be signed soon that is an overall improvement.

“So, this is a major achievement,” he said. “In general, my sentiment is that this is going to be an improvement, but there are some difficult issues I have to discuss with stakeholders in Mexico. But we are getting there.”

Despite the optimistic tones and the final push to approve it, the path to ratification for the pact remains far from certain, analysts warn.

Indeed, since negotiations between Lighthizer and House Democrats have taken place under confidentiality agreements, “we don’t really know what they’ve agreed to,” said Dan Uzcjo, an Ohio-based trade lawyer with Dickinson Wright. That will become clear only when an implementing bill is written and presented to Congress for consideration.

“Everyone might say this is a done deal. It’s not,” Uzcjo said. “There’s a lot more work to do in December and January. The implementing bill is where the fight begins and going through that will take up until Christmas, perhaps longer.”

Everyone might say this is a done deal. It’s not. There’s a lot more work to do in December and January.

Dan Uzcjo, trade lawyer, Dickinson Wright

Democrats, for instance, are pushing to shorten patent protection for a class of drugs known as biologics to eight years from 10. Those changes could anger the pharmaceutical lobby, he noted.

Crucially, the trade deal has also faced resistance from labour group leaders, including Richard Trumka, president of the powerful AFL-CIO union, who last month warned that the agreement “would be defeated” if Congress voted before the U.S. Thanksgiving. American unions — who believe the original NAFTA did little to stop the flow of U.S. jobs to Mexico — are emphatic about the need to ensure labour reforms are fully carried out this time.

“The problem is organized labour is dead set against this deal,” said Gary Hufbauer, a senior fellow at the Washington-based Peterson Institute for International Economics. “If the unions double down against it and the Democrats vote it through anyway, I think it’ll hurt their chances in the election.”

House Speaker Nancy Pelosi, charged with the decision on whether to put the bill forward for a vote, could easily argue that with only a few weeks left in the political calendar, not enough time remains for Congress to consider the deal, he added.

U.S. President Donald Trump lashed out Pelosi and other Democrats last week, saying USMCA is “dead in the water” because of the party’s inaction.

Pelosi has insisted the Democrats are working hard, to “get to yes” on the deal, though she recently suggested a vote is unlikely in 2019. Pushing the deal into 2020 raises the risks of it languishing amid the runup to the U.S. presidential election, analysts have warned.

It could also see the deal reopened for further negotiations, something Ottawa and Mexico City have said is a non-starter, though Freeland said this week that Canada was prepared to do everything it can to ensure ratification.

“I do think if it spills into 2020 the new administration may take it back to the negotiating table whether it’s Trump or someone else elected,” Hufbauer said.

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