WASHINGTON (AP) – United States (US) President Donald Trump was eager to show off a big policy win during his impeachment trial after signing into law a major rewrite of the rules of trade with Canada and Mexico.
Trump made renegotiating the North American Free Trade Agreement (NAFTA) a priority during his 2016 campaign, although trade experts said the impact of the new US-Mexico-Canada Agreement (USMCA) will be modest. He signed the bill yesterday.
Canada and Mexico already represent the top two export markets for US goods. But the pact, along with the signing of a “phase one” agreement with China, dials down trade tensions that contributed to slowing economic growth globally.
The leaders of the three nations signed the new pact in late 2018. Legislation implementing the USMCA received overwhelming, bipartisan support in Congress after several months of behind-the-scenes negotiations between Democratic lawmakers and the Trump administration.
Prominent Democratic lawmakers were left off the White House guest list for yesterday’s event. The snub came after the Democratic-led House impeached Trump.
“The White House hasn’t invited House Democrats to their USMCA signing ceremony. But we’ll be well represented in the huge changes to the original USMCA draft that Democrats wrested out of the administration on labour, prescription drugs, environment and enforcement mechanisms,” said Henry Connelly, a spokesman for House Speaker Nancy Pelosi.
NAFTA, which took effect in 1994, tore down trade barriers between the three North American countries and commerce between them surged. But Trump and other critics said NAFTA encouraged factories to leave the US and relocate south of the border to take advantage of low-wage Mexican labour.
Trump threatened to leave NAFTA if he couldn’t get a better deal, creating uncertainty over regional trade.
His trade negotiator, Robert Lighthizer, pressed for a revamped pact designed to bring factory jobs back to the US. USMCA, for example, requires automakers to get 75 per cent of their production content (up from 62.5 per cent in NAFTA) from within North America to qualify for the pact’s duty-free benefits. That means more auto content would have to come from North America, not imported more cheaply from China and elsewhere.
At least 40 per cent of vehicles would also have to originate in places where workers earn at least USD16 an hour. That would benefit the US and Canada — not Mexico, where auto assembly workers are paid a fraction of that amount.
The independent US International Trade Commission last year calculated that USMCA would add 0.35 per cent, or USD68 billion, to economic growth and generate 176,000 jobs over six years — not much of a change for a USD22 trillion economy with 152 million nonfarm jobs.
“It’s a blip,’’ said Syracuse University economist Mary Lovely, who studies trade. “The main thing is what it isn’t: It isn’t a continuation of uncertainty, and it isn’t a major disruption’’ to business.