Trump, House Democrats strike deal on revised USMCA trade pact

USA TODAY and Colleen Kottke
Wisconsin State Farmer
President Donald Trump announces the United States-Mexico-Canada Agreement on Oct. 1, 2018.

WASHINGTON – House Democrats and President Donald Trump have struck an agreement to revise a new trade deal with Mexico and Canada, delivering a win for the president on a top legislative priority.

House Speaker Nancy Pelosi, D-Calif. announced the agreement at a news conference Tuesday morning, calling the revised trade pact "a victory for America's workers." She did not say when the House would vote on the revised agreement but suggested it could happen before the end of the year.

Top trade officials from the United States, Mexico and Canada are expected to meet in Mexico City for an afternoon ceremony, according to government schedules.

Upon learning of the news, Mexico approved changes to the trade pact, paving the way for congressional ratification.

"Mexico's approval of USMCA changes proposed by the U.S. is welcome news for U.S. pork producers and all of American agriculture," said National Pork Producers Council President David Herring, a pork producer from North Carolina.

Pelosi and other Democrats said the revised agreement includes stronger provisions on labor, enforcement and pharmaceuticals that they had sought as condition for putting the United States-Mexico-Canada Agreement, or USMCA, to a vote in Congress.

Pelosi described the revised deal as "infinitely better" than the proposed agreement the Trump administration sent to Congress.

The Trump administration has been pushing for Congress to ratify the trade agreement before the end of the year. The revisions could clear the way for congressional approval of the deal. 

Shortly before Pelosi's news conference, Trump took to Twitter and said the deal had "very good Democrat support."

 "That would be great for our Country!" he wrote.

President Trump took to Twitter to share the good news.

A new trade agreement, announced 15 months ago after months of negotiations, will replace the North American Free Trade Agreement, or NAFTA, a nearly quarter-century-old accord that essentially eliminated tariffs on most goods traded among the three countries.

Trump blamed NAFTA for the loss of American jobs and frequently slammed it as the “worst trade deal ever” and during the 2016 presidential campaign. After taking office, his administration opened talks with Mexico and Canada to rewrite the agreement.

U.S. Secretary of Agriculture Sonny Perdue said the USMCA trade agreement is a big win for American workers and the economy, especially for farmers and ranchers.

U.S. Secretary of Agriculture Sonny Perdue said the USMCA trade agreement is a big win for American workers and the economy, especially for farmers and ranchers.

"The agreement improves virtually every component of the old NAFTA, and the agriculture industry stands to gain significantly," Perdue said in a statement. "President Trump and Ambassador Lighthizer are laying the foundation for a stronger farm economy through USMCA and I thank them for all their hard work and perseverance to get the agreement across the finish line."

The new trade pact includes rules for the movement of products between the three countries. Among the new provisions are a requirement that a higher percentage of autos be made from parts manufactured in North America.

Under NAFTA, automakers qualify for zero tariffs if 62.5 percent of their vehicles’ components are manufactured in the U.S., Canada or Mexico. That figure would jump to 75 percent under the new deal. Starting in 2020, 30 percent of vehicle production also would have to be done by workers earning an average production wage of at least $16 per hour. By 2023, that percentage would rise to 40 percent.

The agreement would run for 16 years but would be reviewed after six years and could be extended for another 16.

USMCA will advance United States agricultural interests in two of the most important markets for American farmers, ranchers, and agribusinesses. This high-standard agreement builds upon the country's existing markets to expand United States food and agricultural exports and support food processing and rural jobs.

Canada and Mexico are the U.S.'s first and second largest export markets for food and agricultural products, totaling more than $39.7 billion food and agricultural exports in 2018. These exports support more than 325,000 American jobs.

All food and agricultural products that have zero tariffs under the North American Free Trade Agreement (NAFTA) will remain at zero tariffs. Since the original NAFTA did not eliminate all tariffs on agricultural trade between the United States and Canada, the USMCA will create new market access opportunities for United States exports to Canada of dairy, poultry, and eggs, and in exchange the United States will provide new access to Canada for some dairy, peanut, and a limited amount of sugar and sugar-containing products.

Edge Dairy Farmer Cooperative, one of the largest dairy co-ops in the country, applauded Tuesday's news from the nation's capital. 

"Dairy farmers across the Midwest appreciate the commitment and work of the administration and lawmakers to secure a better trade deal for U.S. dairy farmers," said Brody Stapel, president of Edge and a dairy farmer in eastern Wisconsin. "Our farmers have been waiting in uncertainty for more than a year for USMCA to get done."

Brody Stapel

While it's good new to see the deal take a step forward, Stapel cautioned that there is more work to be done until farmers can breathe a sigh of relief.

"USMCA is critical to the long-term success of the U.S. dairy community," said Stapel, referring to the importance of Mexico and Canada as U.S. trade partners. "Combined they account for more than $2 billion each year. This agreement would protect those longtime trading relationships and allow for growth in market share."

National Corn Growers Association President Kevin Ross said it has been a "brutal year for many farmers who really need the certainty this would provide for agricultural trade".

The deal is also good news for U.S. soybean growers as Mexico is the second largest market for whole beans, meal and oil, with Canada lining up as the No. 4 buyer of meal and No. 7 buyer of oil, making the trade agreement essential to sustaining the growth realized in those two countries under the North American Free Trade Agreement (NAFTA).

Under NAFTA, U.S. soybean sales to Mexico quadrupled and to Canada doubled

Rep. Ron Kind of Wisconsin said the revised deal is a good example of what can be accomplished when lawmakers work across the aisle. 

"The bipartisan efforts, changes to labor standards, increases in enforceability measures, and the solidifying of agricultural access should all serve as a baseline for how future trade agreements will be drafted," he said. "Raising standards in trade agreements to level the playing field for workers, farmers, and businesses is vital so we are not trying to compete in a race to the bottom that will jeopardize jobs in America."

Rep. Mike Gallagher of Wisconsin issued a succinct statement conveying his sentments over the drawn out action of the Democrat-controlled House.

“It’s about damn time.”

Key Provisions of USMCA

Increasing Dairy Market Access—America’s dairy farmers will have expanded market opportunities in Canada for a wide variety of dairy products. Canada agreed to eliminate the unfair Class 6 and 7 milk pricing programs that allowed their farmers to undersell U.S. producers.

Biotechnology—For the first time, the agreement specifically addresses agricultural biotechnology – including new technologies such as gene editing – to support innovation and reduce trade-distorting policies.

Geographical Indications—The agreement institutes a more rigorous process for establishing geographical indicators and lays out additional factors to be considered in determining whether a term is a common name.

Sanitary/Phytosanitary Measures—The three countries agree to strengthen disciplines for science-based measures that protect human, animal, and plant health while improving the flow of trade.

Poultry and Eggs—U.S. poultry producers will have expanded access to Canada for chicken, turkey, and eggs.

Wheat—Canada agrees to terminate its discriminatory wheat grading system, enabling U.S. growers to be more competitive.

Wine and Spirits—The three countries agree to avoid technical barriers to trade through non-discrimination and transparency regarding sale, distribution, labeling, and certification of wine and distilled spirits.

What's the hold up?

Trump and the leaders of Mexico and Canada signed the deal late last year, but Congress has yet to approve the agreement. Trump has blamed House Speaker Nancy Pelosi for the delay, arguing she was holding it up under orders from labor unions.

The new trade agreement included some policies embraced by Democrats, including stronger labor standards and environmental provisions. Yet labor groups and other critics complained those provisions didn’t go far enough and that the new agreement did not include sufficient mechanisms to enforce the new requirements.

When House Democrats regained the majority in January, Pelosi and other Democratic leaders began negotiations with the Trump administration to revise the trade pact to address those concerns.

Rep. Jan Schakowsky, D-Ill., who was involved in the trade talks, said the revised deal eliminates a pharmaceutical provision that protected manufacturers of expensive brand-name drugs from generic copies of their medicines.

Under U.S. law, pharmaceutical makers are given 12 years of market protection for their drugs, which essentially provides them with a limited monopoly against competition from manufacturers of generic medicines. Canada grants drugmakers eight years of market protection, and Mexico provides five.

Richard Trumka, president of the AFL-CIO, endorsed the revised trade agreement. While the deal is "far from perfect," he said, "there is no denying that the trade rules in America will now be fairer because of our hard work and perseverance."

Some Republicans have questioned whether negotiators over-compensated on revamping the agreement in order to get Democratic votes.

One of them, Sen. John Cornyn, R-Tex., declined to endorse the revised version, saying he needed to look at the details.

“I look forward to reviewing the agreement, hearing how it will impact Texas and providing feedback," Cornyn said.

Mexico’s Senate already has ratified the agreement, but Canada has been waiting for the U.S. Congress to act before it approves the pact.

“NCGA appreciates the bipartisan efforts between Speaker Pelosi, Ambassador Lighthizer and the House working group to reach an agreement," Ross said. "However, I urge lawmakers to pass USMCA and help us close out 2019 with a win for America’s farmers and the U.S. economy.”