United States: The New NAFTA: 5 Things To Know

The Trump administration announced Sunday night that trade ministers from the United States, Mexico and Canada had reached agreement on revisions to the 1994 North American Free Trade Agreement, the framework for $1.2 trillion of annual trade among the three countries.

The text of the agreement and side letters can be found here.

Here are five things to know about the trade agreement:

1. What's in a name?

It's not the new NAFTA. Or even NAFTA 2.0.

The White House says the agreement will be called the "United States-Mexico-Canada Agreement." Trump last month said he liked the abbreviation "USMC" because it's also the abbreviation used for the U.S. Marine Corps.

Trump in August said any new three-party trade agreement would drop NAFTA from its name because NAFTA had negative connotations.

2. What does the United States-Mexico-Canada Agreement do?

The agreement includes rewrites to NAFTA's provisions on automobile manufacturing, patents, dairy production, the digital economy, steel and aluminum tariffs, and labor and environmental protections, and more.

The new deal would allow cars and trucks with 75 percent of components manufactured in the three countries to qualify for zero tariffs – that's up from the current 62 percent. It also would increase requirements on hourly wages for workers assembling the vehicles.

U.S. farmers would gain greater access to Canada's dairy market, which Canadian officials had sought to protect by limiting American dairy imports.

Branded pharmaceutical manufacturers won a big victory with 10 years of marketing exclusivity for biologic drugs. That would give drug companies time to recoup their investment in researching and developing biologics, which are far more complex and expensive to manufacture than traditional drugs derived from chemical synthesis.

3. When will Congress vote to ratify?

Not anytime soon. In fact, many of the lawmakers now in Congress will never get a chance to vote on the United States-Mexico-Canada Agreement.

Under the 2015 Trade Promotion Authority law that establishes how trade deals are enacted in the United States, the White House must give Congress the full text of the agreement at least 60 days before the deal is signed.

The announcement of the agreement last night allows the three countries to sign the deal by Nov. 30 – the last day in office for Mexican President Enrique Peña Nieto.

But on Nov. 6 in the United States, voters nationwide will elect 435 House members and more than one-third of the Senate. Many election forecasters say Democrats have at least an even chance to gain the 23 seats needed to win the majority in the House. While Republicans are expected to hold their Senate majority – and possibly even add seats – Democrats could gain the majority there, too.

The new 116th Congress will be sworn in during the first week in January.

4. Would a Democrat-controlled Congress approve the agreement?

Congress has a lot of work to do on the new agreement. Several House and Senate committees will hold hearings to hear from Trump administration officials, economists and sector-specific stakeholders.

What if Democrats are in control of the House in 2019? What would those hearings be like? Although potential House Speaker Nancy Pelosi, D-Calif., did vote for NAFTA in 1993, her party has grown far more liberal since then. The party's leading 2020 presidential contenders regularly call for new laws and regulations to rein in corporations and well-to-do entrepreneurs.

Moreover, some Democratic lawmakers want impeachment proceedings to begin immediately if their party wins the House majority. Others say they will use an obscure law from 1924 to gain access to years of Trump's tax returns and release them publicly.

Democrats' No. 1 priority if they control at least one chamber of Congress would be aggressive oversight of the Trump administration. That means subpoenas will be flying down Pennsylvania Avenue from the Capitol to the White House, and administration officials will be summoned for countless oversight hearings.

In this environment, would Democrats help Trump achieve what was a principal goal of his in renegotiating NAFTA? Would Democrats countenance giving Trump a political victory?

In a statement last night, AFL-CIO President Richard Trumka said the new deal's "added protections for working people and some reductions in special privileges for global companies is a good start." But he said too many details are still unknown and "need to be worked out before working people [can] make a final judgment on the deal."

When asked if Congress would ratify the deal, Trump said today at the White House that "he's not at all confident" but also said he "didn't know."

It's too soon to say whether a new agreement would win congressional approval next year. But if Democrats control one of both chambers of Congress, the effort to ratify the United States-Mexico-Canada Agreement would be substantially more difficult.

The agreement also has to be ratified by Mexico's new legislature and Canadian lawmakers in what will be an election year in Canada.

5. It's a big win for Trump.

Trump has criticized NAFTA since its enactment and pledged during the 2016 campaign that he would rewrite it. Not only has he done that but he's also fully embraced tariffs as a tool to force trade renegotiations with China and Europe.

The road to rewriting NAFTA was rocky, including name-calling between heads of state and criticism from congressional Democrats. Ratification in the three capitals is anything but certain.

It's also not certain whether the agreement will buoy Trump's standing in national polls or aid congressional Republicans battling to maintain their majorities on Capitol Hill in next month's midterm elections. But what is clear is that the new agreement represents a significant policy and political victory for Trump.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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