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After months of discussion, congressional Democrats have struck a deal with the Trump administration over trade with Mexico and Canada. If passed by Congress, the USMCA will be the United States’ largest single trade agreement, with trillions of dollars in goods flowing both ways. Amna Nawaz reports and talks to The Wilson Center’s Christopher Wilson about what changed from NAFTA--and what didn’t.
We were just talking about the USMCA, as it's called.
Let's break down this trade agreement further and examine what was agreed to and what it means.
Amna Nawaz has that part of the story for us.
Rep. Nancy Pelosi, D-Calif.:
It's a victory for America's workers.
Today's agreement would replace the 25-year-old North American Free Trade Agreement first signed into law and hailed by President Bill Clinton.
NAFTA will tear down trade barriers between our three nations. It will create the world's largest trade zone and create 200,000 jobs in this country by 1995 alone.
Politicians and economists have long debated NAFTA's impact on economic growth and jobs in this country.
But many workers, labor unions and political leaders say the deal made it too easy for Mexico to lure manufacturing jobs and factories out of the U.S. President Trump has long pledged to either get rid of NAFTA or substantially rewrite it.
It was a crucial promise of his campaign.
President Donald Trump:
I'm going to renegotiate NAFTA, one of the worst trade deals ever signed in the history of our country.
(CHEERING AND APPLAUSE)
NAFTA won't exactly be eliminated. Many of its provisions governing trade between Mexico, Canada and the U.S. will still be intact.
But the new deal has provisions aimed at increasing manufacturing here. Specifically, a greater percentage of a car and its components will have to be produced in North America, and by workers who get better wages.
The Trump administration, Democrats and labor unions all say USMCA will provide tougher labor enforcement, including some inspections in Mexican factories. It also includes a loss for the pharmaceutical industry by stripping out a rule that would have protected expensive biological drugs from generic competitors for 10 years.
Meanwhile, today in Mexico City, U.S. trade Representative Robert Lighthizer signed the deal with his Mexican and Canadian counterparts.
The result, I think, is the best trade agreement in history.
Mr. Trump has indicated he will sign the USMCA once it is passed by Congress.
For a closer look at some of the provisions in this new deal and what their impact will be, I'm joined by Christopher Wilson, who closely follows NAFTA and Mexico for the nonpartisan Wilson Center.
Welcome to the "NewsHour."
Thanks a lot for having me.
So, let's take a step back here. Some of the provisions from the previous NAFTA deal do remain in this new deal.
How substantially different is this new USMCA from the old NAFTA?
Yes, I would say the new USMCA is really 90 percent NAFTA. And that's actually the most important thing here is that what happened is that this cloud of uncertainty about the future of NAFTA, the possibility that the president might withdraw from NAFTA, goes away with the agreement around the completion of the USMCA.
That matters because companies have invested billions of dollars in the creation of a North American system of manufacturing production. So we have now not just sort of regular trade of finished goods happening between the United States, Mexico, and Canada. We're actually building things together.
And so all of those products, all of that trillion dollars of trade was put at risk. Now investors, companies that are involved in the trade can sort of breathe a sigh of relief and continue doing business.
That said, there were, of course, some important changes as well.
Important changes, important updates, too. Why were those necessary?
Well, that's matter of huge debate, whether those were necessary or not.
And I think, in certain areas, different people would sort of have different opinions. So, on labor, for example, the idea that there was a need for changes to Mexican labor law, Mexico agreed to a major labor reform through the USMCA, that, in my opinion, was absolutely necessary.
Workers in Mexico were not well-represented previously, are not currently well-represented, but under the new labor reform, they will have real unions that represent the workers, instead of employer-dominated unions that have probably artificially suppressed wages to a certain extent in Mexico previously.
So, hopefully, that will change for the better following this agreement.
There's also been sort of a rebalancing, right? There was this big push to try to bring back those manufacturing jobs to the U.S., protect the wages here. Will this deal have a significant impact on that front?
I mean, I think the reality is that most of those jobs in manufacturing that have been lost in the United States were lost due to automation, technological change, robots on the factory floor, things like that.
So we shouldn't expect any major changes. I mean, the reality is, in my opinion, NAFTA wasn't the main problem there. So changes to NAFTA can't solve that big problem.
That said, there are some specific areas where there are important changes. And the auto industry was one that was mentioned, right? So there will now be rules that say, a larger portion of what goes into an automobile needs to be made in — somewhere in North America.
That's going to bring some auto jobs back to the United States. But it's going to come at a cost, because cars will be a little bit more expensive. And this is what the ITC, the International Trade Commission, of the U.S. government found when they did a study on the change from NAFTA to the USMCA.
They said, there will be jobs gained and sort of production gained in the U.S. auto industry, but there's actually a larger loss in the rest of the economy, because it takes money and new investments to meet these new rules.
So, we could see car prices go up.
I want to ask you, from the American farmer's perspective, because the auto industry gets a lot of attention when it comes to this. Mexico's a huge purchaser when it comes to American wheat. And barley farmers have had a lot of uncertainty, not just with this deal, but also under the trade tariffs.
What does this deal do for them? What does it give them today?
Yes. And this is sort of back to that first message.
It gives them back certainty about their market. And Canada and Mexico are incredibly important markets for our agricultural community in the United States. There's, of course, huge challenges right now because of the trade war going on with China as well.
Whenever there's a trade war, agriculture is the place in the United States that gets hit first. China will respond with tariffs on agriculture in the United States. Mexico and Canada responded when there were steel and aluminum tariffs being fought over last year with tariffs on U.S. agricultural exports.
And that's because they're politically sensitive. People know, other countries know that, if they hit agriculture in the United States, it's a way of exerting political influence on Congress in the United States.
And so this deal just gets us back to having certainty. It also provides a little bit of new access to the Canadian dairy market. There's a few extra good things in there for agriculture. But it gives them a platform on which they can continue to do business.
And we mentioned the stripping away of protection for drug companies against generic competitors. Does this mean prices could come down?
Well, we will have to see what happens in the future there, because the — what we have is, this is specifically about biologic drugs, a specific set of sort of pretty expensive, cutting-edge types of drugs generally.
In the United States right now, there's 12 years of intellectual property protection for those drugs. Under the USMCA before, there had been a commitment to 10 years of protections for them. Democrats might like to lower that level from 12 years to something lower than 10 years, possibly in the future.
And now, with the update to this, the agreement that they just negotiated, they will be able to do that if they want to. But this is all going to depend on what happens in the 2020 elections in the United States.
But maybe sometime in the future, there will be a change on that specific set of drugs.
Like a lot of things, it's going to depend on what happens in the 2020 election.
Christopher Wilson of the Mexico Institute at the Wilson Center, thanks so much for being here.
Thank you, Amna.
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