Trump’s effort to get Congress to approve his revised version of NAFTA isn’t quite dead, but it’s close. The so called USMCA deal that Trump negotiated last year to replace NAFTA makes some modest improvement in the North American auto content required to qualify for tariff-free treatment; and it rolls back some of the power that corporations have to challenge regulations as anti-trade. The draft agreement also gives more standing to genuinely independent trade unions in Mexico, and adds labor rights to trade—at least on paper.
However, several of its provisions make it a non-starter in the Democratic House. It gives new power to big pharmaceutical companies to keep prices high. And its labor rights provisions are strong on rhetoric and weak on enforcement.
The coalition of corporations that back NAFTA 2.0 had counted on New Democrats and some Democratic freshmen in swing seats to support the deal, but so far the entire caucus has displayed surprising unity in demanding major changes as a condition of their support. Even the New Democrats sent the White House a tough letter warning Trump not to take their votes for granted and not to send up the existing deal for approval. The 102 member group wrote: “We were troubled that you sent up the draft Statement of Administrative Action on May 30 without sufficient consultation, and strongly urge you not to make the same mistake twice.”
A large group of House freshmen, including several swing-district moderates, issued a similar warning.
Labor has also been united in rejecting the existing NAFTA 2.0. A few unions could be net gainers from the deal as written, however AFL-CIO president Richard Trumka has been able to keep the labor federation from splintering. Environmental groups have also been strong in demanding major changes.
U.S. Trade Representative Robert Lighthizer, negotiating with the Democrats on behalf of President Trump, has signaled that he might throw Big Pharma under the bus to get a trade deal. Lighthizer has also indicated openness to stronger provisions to enforce the labor rights that are nominally part of the deal.
The problem, however, is that labor provisions with teeth would likely be too much for both Trump and his coalition of corporate backers. Concretely, the Democrats want a provision proposed by Senators Sherrod Brown and Ron Wyden that would literally allow imports produced in violation of labor standards to be turned back by customs inspectors at the border. It’s hard to imagine NAFTA’s corporate backers swallowing this. Even with a revised NAFTA, jobs will continue to be outsourced to Mexico, where wages will remain a fraction of those in the U.S.
Lighthizer, at the urging of Democrats, has so far restrained Trump from sending to Congress the existing deal for an up or down vote. It’s clear that it would lose without substantial revision. But with Trump, you never know whether impulsivity will win out.
On the Democratic side, House Speaker Nancy Pelosi, who sometimes has had difficulty controlling a fractious caucus on other issues, holds all the cards this time.
A couple of weeks ago, over Pelosi’s objections, Congress sent President Trump a $4.6 billion bill providing more funds for border operations and humanitarian aid, but without standards that would mandate and enforce and mandate better conditions for refugees. Dozens of House Democrats voted for the bill despite the lack of stronger protections, infuriating progressives and embarrassing the Speaker.
The NAFTA vote will be entirely different, procedurally and substantively. The border bill had been passed by the Senate, and was basically sent to the House for concurrence. But in the NAFTA case, Pelosi has the power to bestow or deny fast-track trade treatment. If the White House does not produce changes that satisfy most Democrats, she can simply kill it procedurally and it will never come to a vote.
Even if Lighthizer does strike a provisional deal with Democrats for much tougher labor and environmental standards and a reversal of the giveaway to the big drug companies, Trump has displayed such petulant animus toward Mexico, that he might just pull the U.S. out of NAFTA and raise tariffs for spite.
Democrats are also hanging tough this time because it’s not clear that they want to hand Trump a trade victory going into an election year. If the draft agreement is revised to include truly enforceable labor and environmental protections, maybe. If not, let Trump explain to his constituents why he was unable to get a deal.