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Last week, IPC and more than 200 companies and industry associations announced the launch of a new coalition to make the case for congressional adoption of the U.S.-Mexico-Canada (USMCA) Free Trade Agreement.
The coalition has a series of daunting and time-pressing tasks ahead of it. The USMCA needs to surmount procedural and political hurdles and be passed this year if we are to avoid the pitfalls of election year politics in the United States.
When the leaders of the United States, Canada and Mexico signed the agreement last November, President Trump expressed his desire to see the trade bill move through Congress by early spring, if not sooner. However, several factors have pushed the timeline into at least the summer. The U.S. International Trade Commission (USITC), which is responsible for producing a report on the economic impacts of the trade legislation, fell victim to the government shutdown. Their report, which was originally due March 15, may now be pushed back as late as May 5. Although Congress is not required to wait on this report, it is unlikely that either chamber would approve the pact without an official statement on the impacts.
Congress is also waiting on the draft implementing legislation that the US Trade Representative is required to submit to Congress at least 30 days prior to introduction of the bill. Given the need to conduct congressional hearings and floor debates before final votes, and given the pressing nature of other congressional business, Congress may not get around to voting on USMCA until July or September. Any additional hurdles in the process would push the bill further into the bright lights of election-year politics.
The agreement has also hit a speed bump in the Democratically controlled House of Representatives. Historically, securing Democratic votes for a trade agreement has proven more challenging than securing Republican votes. For the last 30 years, in fact, trade agreements have been passed with the support of the Republican conference and a small but committed group of pro-trade Democrats. This time, two or three dozen Democrats are likely to cross the aisle and vote with Republicans to pass USMCA, but much remains unclear. President Trump and a changing U.S. economy have scrambled the politics of trade in ways that would have been hard to imagine even 10 years ago.
For their part, House Democratic leaders remain focused on securing changes to the agreement. Specifically, they would like to see more ambitious labor and environmental chapters to include stronger enforcement provisions. Additionally, some Democrats want to reopen negotiations related to prescription drugs. These concerns are layered on top of other bipartisan concerns, including changes to the de minimis threshold, which determines which low-value parcels can be shipped across borders tax-free, tariff-free, and with simple customs forms.
The Trump administration and the business interests that support the pact continue to emphasize the importance of passing it as early in the year as possible. USTR Robert Lighthizer, during his appearance before the House Ways and Means Committee last week, said that the agreement was “clearly” better than NAFTA and that failure to pass it would cause a loss of credibility on trade with China and other trading partners.
The coming months are thus crucial to ensuring the growth and integration of the North American economies through the USMCA. Rest assured, IPC will be in the thick of the debate, urging Congress to pass this bill and bolster the North American electronics supply chain.