Last week, at the G20 Summit in Buenos Aires, Argentina, President Trump signed a new tripartite trade agreement with Mexico and Canada. The agreement, which is referred to as the US-Mexico-Canada Agreement or USMCA, will replace the North American Free Trade Agreement (NAFTA). Since its implementation over two decades ago, NAFTA helped to strengthen the economic ties binding the three trade partners. Trade increased more rapidly between the U.S., Mexico, and Canada since NAFTA’s signing than between the signatories and any other nation, leading to more than $1 trillion in trade each year.
The renegotiation of NAFTA was a key campaign pledge in 2016, and the Trump Administration quickly moved to update the old agreement. Business interests, including TIA, encouraged the Administration to ensure that the agreement remained trilateral and that it would be implemented in a way that would not disrupt commerce and allow for cross-border manufacturing and supply chains to adjust.
While there was broad support for an updating of the original NAFTA accords, passage of the implementing language for the new USMCA agreement may experience some difficulty in Congress. Under Trade Promotion Authority (TPA) granted the Administration, Congress must hold an up-or-down vote on implementing legislation following a set period of time allowed for public input on new provisions of law.
With an incoming Democratic majority in the House of Representatives, the Administration will likely get pushback from new members of Congress related to articles of USMCA that impact the prices of labor (particularly in Mexico). In anticipation of this challenge, President Trump may move to withdraw from NAFTA, to force the hand of Congressional opponents and place additional pressure on adoption of the USMCA. Given the importance of North American trade to the U.S. economy, as well as the fact that many provisions in USMCA mirror efforts to update NAFTA through the Trans-Pacific Partnership which was negotiated by President Obama and supported by Democrats, USMCA is likely to be adopted by bipartisan majorities in 2019 following Congressional consideration.
Cross-border trade is a critically important part of the North American economy. TIA staff will continue to closely monitor and report on all news relating to the consideration and passage of the USMCA. To get involved in the TIA International Logistics conference, or for more information on this trade agreement, please contact Will Sehestedt at sehestedt@tianet.org or 703-299-5713.