Against all odds, the North American Free Trade Agreement (NAFTA) renegotiations launched by the Trump administration in August 2017 were heading towards an outcome that could have generated support from Democrats in Congress, unions, and Public Citizen. NAFTA’s job outsourcing incentives and investor-state dispute settlement (ISDS) regime were on their way out. The timeline to finish talks for a vote to occur this year was looming in June, due to the requirements of Fast Track negotiating authority.
The corporate lobby was apoplectic.
Many issues remained under discussion. Dairy market access, intellectual property rules, labor standards, and even the de minimis value for a shipment to trigger NAFTA’s customs rules were unresolved. But to the horror of legions of lobbyists, U.S. negotiators were making progress on major changes to NAFTA that labor wanted and corporate American opposed.
Enter Speaker Paul Ryan and the House Republican leadership. Last week Ryan abruptly announced an arbitrary deadline for a final deal—today—that he knew could not be met.
The May 17 date he set did not reflect the timelines established under the problematic Fast Track process that applies to the negotiations. But thanks to quirks in that system, Ryan has the power to deny his president a vote on a renegotiated NAFTA during this Congress. What a convenient calling card for a retiring GOP speaker to secure another year of NAFTA’s job outsourcing protections for corporate America.
That once again Ryan and the Republican congressional leadership would stick it to working Americans to protect their big corporate donors is not news. Ryan’s lifetime rating on voting in the interests of working families is only 26 percent. His artificial May 17 deadline for a new NAFTA is all about preserving NAFTA as it is.
But that talks to rewrite NAFTA might actually help working people has a distinctly man-bites-dog sensibility given who is president. It’s actually not as strange as one might think.
First, Trump appropriated the trade reform agenda from Democrats, unions and progressive groups. And whether a president is a Democrat, Republican or Martian, if he or she hopes to reduce our large NAFTA trade deficit and reduce job outsourcing and related downward pressure on wages, there are only certain changes that can make a difference.
Second, Trump appointed Robert Lighthizer as the top U.S. trade official. Lighthizer, who progressive Senator Sherrod Brown dubbed “the best appointee in the Trump administration,” predicted NAFTA would gut American manufacturing when he opposed it in 1993. Make no mistake: Lighthizer is a conservative and has deep ties to Republican policymakers. He also has a long commitment to American manufacturing, is furious about the almost one million jobs that the U.S. government has certified as lost to NAFTA including hundreds from his hometown of Ashtabula, Ohio, and has worked with unions and Democrats in Congress for decades. And, he knows NAFTA inside and out.
As a result, Lighthizer is uniquely positioned to broker a deal that could obtain broad support. He also knows what terms must be changed to alter NAFTA’s outcomes. That is why the corporate lobby is unhinged and key U.S. demands reflect changes that NAFTA’s leading critics—progressives—have demanded for decades.
That includes elimination of investor-state dispute settlement, which makes it less risky and cheaper for corporations to outsource jobs. ISDS empowers multinational corporations to sue governments before a panel of three corporate lawyers. These lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits over claims that domestic laws violate their NAFTA rights. The decisions are not subject to outside appeal. The system operates like free risk insurance subsidizing outsourcing. Already under NAFTA nearly $400 million has been paid to corporations after attacks on environmental and health policies. In a sign of panic that the NAFTA countries were poised to agree, corporations launched a big dollar MSNBC and Fox ad campaign in defense of ISDS.
The administration is also demanding that NAFTA’s waiver of Buy American procurement rules be rolled back. That would mean that firms seeking lucrative U.S. government contracts cannot outsource production of their government-acquired goods and our tax dollars would get reinvested in creating jobs here. That is how it worked before NAFTA. Afterwards top federal contractors like General Electric were free to shift production to Mexico and did.
To be added is a sunset clause that requires an affirmative decision every five years to continue the deal so that it either performs as expected or gets modified again before another quarter century of damage accrues.
Finally, significant progress has been made to establish a higher “rule of origin” so that no longer could products with one-third of their value coming from China or other non-NAFTA countries get NAFTA’s duty-free access. For autos, which represent a huge share of NAFTA trade, the United States Trade Representative (USTR) is demanding 75 percent of value come from the U.S., Mexico, or Canada. And, that 45 percent of a good be produced by workers making $16 per hour. The wage standard is aimed at ensuring that U.S. workers produce a share of the increased North American content, while creating incentives for Mexico to raise wages. Given the Mexican government’s strategy has been to attract investment with low wages, since NAFTA Mexican wages are down and manufacturing wages are now on par with coastal China.
But any revised NAFTA that merits support also must include strong labor and environmental standards with swift and certain enforcement to raise wages and stop the outsourcing of pollution. Otherwise, companies will continue to move U.S. jobs to Mexico to pay workers $2-an-hour poverty wages and dump toxins and then import those products back for sale here.
When Ryan dropped his delay bomb last week, considerable work remained to make the pact’s Labor Chapter acceptable, even as progress had been made. Nor has Mexico passed the labor law reforms necessary to empower workers to improve their outrageously low wages. Mexican law allows “protection” unions to be formed and contracts “signed” before the first worker is hired. When workers at new high tech auto assembly plants strike over wages that typically are less than $2 per hour, they are attacked by the police for opposing the terms the fake union agreed.
Given that there is no acceptable deal for progressives unless these issues are addressed, is there any hope for a Labor Chapter that could make a difference? Before NAFTA talks started, the AFL-CIO issued recommendations about how to do just that. AFL-CIO President Richard Trumka declared: “If President Donald Trump follows our recommendations, if he renegotiates NAFTA, so it’s a real force for higher wages and broadly shared prosperity, we will help pass it.”
Lighthizer has been working closely with American unions to develop terms that could earn their support. That’s a smart approach, because the game-changing deal necessary to improve job and wage numbers can only get through Congress with significant Democratic support.
As Ryan’s willingness to deny his president a vote on a priority issue reveals, some congressional Republicans will not abide any trade deal that gives working people a raise or removes their corporate donors’ outsourcing incentives.Indeed, they continue to demand that NAFTA talks effectively revive the terms of Trans-Pacific Partnership (TPP), even though the politics of trade are so dramatically altered that the TPP remained dozens of votes short of passage despite a massive effort to enact it in 2016.
This political dynamic means that Democratic members of Congress also have been able achieve some improvements to a new NAFTA Environment Chapter. Perversely, the text submitted for NAFTA renegotiations was better than the final TPP Environment Chapter text. However it was not at all sufficient. Some headway has been achieved, but this is a process still underway and in the face of this administration’s relentless attacks on climate and environmental policy, U.S. environmental groups have not engaged in the process.
Also meriting close scrutiny is the resolution of a basket of issues on which progressives and the USTR part company. Indeed progressives have long argued these terms should not be included in trade deals in the first instance.
This includes rules on patents and other monopoly rights that block competition so pharmaceutical firms can raise medicine prices and excessive copyrights and other protections that limit access to information and Internet freedom and threaten our privacy. Also of concern are prospective new limits on food safety, labeling and inspection and rules foreclosing regulation of e-commerce giants. Democrats in Congress have made clear that they cannot support a revised NAFTA that rolls back such critical consumer protections.
So, what happens now? Talks are continuing, regardless of Ryan’s fake deadline. A game-changing deal that prioritizes working families will be determined by the content, not the calendar.
Indeed, given the midterm elections are projected to increase Democrats’ power in Congress, by trying to shut down a vote this year and pushing it into the next Congress, Ryan may have made it easier to pass the sort of deal that would merit progressives’ support.
But even assuming such a shift in the composition of Congress and that Trump does not abandon his high profile NAFTA fix or nix pledge or tweet torpedo a deal, if a transformative NAFTA replacement is negotiated a battle royal will be joined.
In a stunning role reversal, powerful elements of the corporate lobby would be trying to kill a new deal that might establish a fairer trade policy. And unions, progressives in Congress and groups like Public Citizen will be fighting to build a majority to replace NAFTA and end NAFTA’s ISDS regime, remove its job outsourcing incentives—the biggest IF—add labor and environmental standards that could actually help raise wages and improve conditions for people throughout North America. That could be the only positive thing that could come out of this terrible administration.
If the deal fails, Trump has threatened to pull out of NAFTA. So corporate America could lose either way. It would be far better to fix NAFTA along progressive lines. That may yet occur.