White House, Dems Reach USMCA Agreement

December 12, 2019

House Democrats—led by Speaker Nancy Pelosi (D-Calif.)—have reached a deal with the Trump Administration on the new North American trade agreement, clearing the way for Congress to vote on the pact as soon as next week—December 19. The Office of the U.S. Trade Representative (USTR) released the text of changes it made to the agreement, in hopes of winning more Democratic support, but it hasn’t sent an implementing bill to Congress yet.

The deal—the U.S.-Mexico-Canada Agreement (USCMA) pushes President Donald Trump significantly closer to fulfilling his signature 2016 campaign promise of updating NAFTA with Mexico and Canada. The agreement updates the North American Free Trade Agreement, the 1994 pact that governs more than $1.2 trillion worth of trade among the three nations, for the 21st century. There are a lot more rules in the USMCA on intellectual property and data, as well as labor and environmental protections. The announcement signals that congressional Democrats, who have been negotiating changes with U.S. Trade Representative Robert Lighthizer, are now largely satisfied with the pact’s labor, environmental, enforcement and pharmaceutical provisions.

After more than six months of negotiations, Democrats came away with a deal that they believe looks significantly different from the original. It includes stronger labor enforcement rules requested by Democrats and excludes a provision that would have given drug companies more time to sell brand-name drugs without competition. Specifically, special patent protections for new-age biological drugs were stripped out of the agreement in a major disappointment to the U.S. pharmaceutical industry. Meanwhile, Speaker Pelosi conceded that liability protections for internet companies will be included in the deal. The language, which echoes Section 230 of the 1996 Communications Decency Act, has been crucial to the internet’s growth by shielding online businesses from liability for content that their users post.

Democrats are satisfied with provisions that would allow the U.S. to verify that Mexican factories are complying with higher labor standards and penalize them if they do not, according to a fact sheet provided by House Democrats. However, Mexican officials have vehemently denied agreeing to inspectors entering Mexico, and instead have said that Mexico agreed to a labor enforcement mechanism specifically tied to union elections and contracts. It would allow the U.S. to file a complaint and give Mexico 85 days to resolve the issue. A panel would be created if the issue was not resolved.

House Democrats are pressing for a vote next week, which means we could see implementing legislation any day now. The Ways and Means Committee could waive its time on mock markups and send the deal straight to the floor for a vote, which would speed up the timeline. Some senior House Democrats are speculating a vote could come on Dec. 19, the day after the chamber is expected to vote on impeachment and the day before members leave for holiday recess.

Finance Chairman Chuck Grassley (R-Iowa) has said he wants to follow regular procedure for approval rather than short-circuit the process. Majority Leader Mitch McConnell (R-Ky.) said the chamber will not take up the deal this month, and instead has said consideration of the USMCA will “happen in all likelihood right after” the impeachment trial, which could be held in January.

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