U.S. President Donald Trump, seen here on Dec. 10, 2019, in Hershey, Pa., does not want to be accused of having renegotiated NAFTA to help Big Pharma further stick it to the little guy.Patrick Semansky/The Associated Press
Three years ago, U.S. President Donald Trump called NAFTA, the North American free-trade agreement, the “worst deal ever,” and threatened to rip it up.
But last fall, when the three trade partners reached the United States-Mexico-Canada Agreement, that “new NAFTA” embraced by Mr. Trump sure looked a lot like the old NAFTA.
And on Tuesday, after the President’s Democratic Party opponents in Congress succeeded in reopening the USMCA, inserting changes accepted by Mexico and Canada, Speaker of the House Nancy Pelosi said the modified agreement was not just an improvement on the one reached by Mr. Trump but “infinitely better.”
Hyperbole is often the currency of politics, but south of the border, it’s being devalued through overuse.
NAFTA, the original trade deal, was good for Canada. The new deal – USMCA, version 1.0 – was also a good deal, since it was the old house, with fresh paint and a few renovations. And the new, new deal signed on Tuesday? Think of USMCA version 2.0 as a minor update to USMCA 1.0 operating system. It’s not “infinitely” better. But it looks like a small, measurable improvement.
What’s more, the divided nature of the U.S. government means that USMCA 2.0 is largely the product of an American versus American fight, achieving some things that Canada could not have attained on its own.
After the election of Mr. Trump, the very real fear was that NAFTA would be killed.
Instead, it’s been largely retained.
And after last year’s successful negotiation of the new NAFTA, the very real fear was that it would be stuck in permanent limbo in a divided and deadlocked Congress. Instead, thanks to bipartisan agreement, it’s been slightly improved.
From the Canadian perspective, the most important change that Ms. Pelosi and the Democrats have brought to the USMCA may be the removal of the previous text’s entrenchment of a long period of patent protections for biologic drugs, originally inserted at the Trump administration’s insistence.
The U.S. has the world’s highest drug prices and highest drug spending, and that’s become a source of considerable anger among both Republican and Democratic voters. Mr. Trump does not want to be accused by Democrats of having renegotiated NAFTA to help Big Pharma further stick it to the little guy. That’s why those drug protections, written into the USMCA last year at the behest of the Americans, are being removed this week, at the behest of the Americans. The initial demand was one Canada had to swallow; the latest ask is one Canada is happy to accept.
The full text of the amended USMCA is not yet public, but it also includes an end to so-called panel blocking – countries that prevent dispute resolution panels from operating by refusing to appoint panelists.
And perhaps the biggest change signed off on Tuesday is directed at Mexico, involving mechanisms for overseeing the labour rights clauses imposed on that low-wage country.
On Tuesday, Ms. Pelosi’s press conference on the USMCA came shortly after her press conference on the articles of impeachment against Mr. Trump. It shows that, when it’s in their mutual interest, Democrats can still work with a President they are trying to remove, and vice versa.
That’s in part because everyone knows the President is not about to be convicted in the Senate, so the real fight is next fall’s election.
To win the election, Mr. Trump, Ms. Pelosi and their respective parties know they need to be seen to be getting something done on trade. Neither side wants to be painted as the one that hurt American workers for the sake of their own political advantage. Both want to claim credit for the deal, while blaming the other for any shortcomings.
For Canada, the end of the USMCA process cannot come soon enough, because the World Trade Organization is dying. On Tuesday, the terms of two judges on the WTO appeals body expired; with the U.S. unwilling to approve new judges, the WTO is now effectively incapable to enforcing its rules.
As for the USMCA, it’s not yet in port. Approval by the U.S. Senate would be a certainty today, but that body is first going to deal with Mr. Trump’s impeachment. Senate Majority Leader Mitch McConnell says he won’t get to the trade agreement until the new year.