U.S. Congress

With the signing of the Protocol of Amendment to the United States-Mexico-Canada Agreement (USMCA) on December 10, 2019, the battle over USMCA now moves to the Congress. Throughout the two-and-a-half year negotiating process, a threat by President Trump to withdraw from USMCA’s predecessor, the North America Free Trade Agreement (NAFTA), has hung over the negotiations, with significant legal uncertainty over whether the president has the authority to do so absent action by Congress. Congress now has the chance to clear up that ambiguity and to reassert its constitutional authority over trade policy. But to do so, it will have to act fast. It is likely that the Office of the United States Trade Representative (USTR) will bypass the traditional process of holding a “mock markup” that would allow the Congress to propose amendments to both the legislation implementing the USMCA and the accompanying Statement of Administrative Action (SAA), which outlines executive branch commitments on how the provisions of the USMCA will be implemented. Rather than follow the usual order, USTR is expected to introduce a final, non-amendable bill next week, along with a (presumably amended) SAA, for quick consideration by the House Ways and Means Committee before it is sent to the House floor for final passage. Given the indications from Senate Majority Leader McConnell that the Senate will not take up the USMCA until after the impeachment trial ends early next year, it is not clear why all of the procedural steps in the fast track process must be waived. Before it is too late, Congress should insist on including a number of items in the implementing legislation or on essential changes to the May 30, 2019, draft Statement of Administrative Action (SAA). Indeed, U.S. Trade Representative Robert Lighthizer’s transmittal letter for the SAA emphasized that the submission “is just that –a draft. It does not in any way prejudice the content of the final implementation package, i.e., the final SAA, final implementation legislation, and the final, binding text.” Now is the time for Congress to hold Ambassador Lighthizer to his word and insist on changes to the implementing bill and the SAA in the following areas: 1. Withdrawal from USMCA The language of the USMCA mirrors that of the NAFTA: any party may withdraw from USMCA by providing written notice of withdrawal to the other parties, with the withdrawal taking effect six months after notice is given. USMCA Article 34.6. What the text of the NAFTA and the USMCA do not say is who gets to decide to submit the withdrawal notice, under what authority, and pursuant to what procedures. Congress should fill in those blanks by insisting on language, preferably in the implementing bill itself but if not, in the SAA, that spells out a process and clear role for Congress before any withdrawal notice can be sent. If it takes an act of Congress under the well defined Trade Promotion Authority procedures, input from stakeholders and advisory committees, and a formal economic evaluation from the United States International Trade Commission (USITC) to enter into the USMCA, surely it ought to take at least some process and congressional input to withdraw. The May 30 draft SAA is completely silent on how the Trump administration intends to implement the withdrawal provision. Congress should insist that either the implementing legislation itself or the SAA include a commitment to a transparent process, including public hearings, input from the trade advisory committees, a USITC economic evaluation of the costs and benefits of withdrawal, and a fast-tracked Congressional vote before a notice of withdrawal can be sent to the USMCA parties. 2. Six-Year Joint Reviews Article 34.7 of USMCA calls for a meeting of the Free Trade Commission (consisting of trade ministers of the United States, Canada, and Mexico) at least every six years. The purpose of the meeting is to conduct a joint review of the USMCA’s operations, to consider any recommendations for action submitted by one of the USMCA parties, and to confirm each party’s desire to extend the USMCA for a sixteen-year period. Here too the May 30 draft SAA is silent on how the Trump administration intends to approach these six-year reviews. Congress should insist that either the implementing legislation or the SAA include a clear role for Congress in developing recommendations to be presented on behalf of the United States at the joint review sessions, and, as noted below, in determining whether to confirm continued U.S. participation in the UMSCA. 3. Decision to Invoke the Sixteen-Year Sunset Clause Article 34.7(1) states that the USMCA shall terminate sixteen years after it enters into force unless each of the three parties affirmatively confirms its desire to continue the agreement for a new sixteen-year period. That confirmation must be made in writing at the six-year joint review meetings. Congress should treat the decision to allow the USMCA to terminate at the end of the sixteen-year period the same as a notice of withdrawal. A decision not to confirm the United States’ continued participation in the USMCA ultimately has the same legal effect as withdrawal. It should be done only following a full process that includes input from all stakeholders and trade advisory committees, a USITC economic evaluation, and a vote of Congress. The uncertainty created by the manner in which U.S. trade policy has been conducted over the past three years has led to numerous calls for Congress to reassert the power expressly given to it by the Constitution to establish tariffs and regulate foreign commerce. The problem has been the limited opportunities for Congress to do so. The USMCA presents just such a chance. On the essential issue of whether to enter into and whether to exit as important a trade agreement as the one with our two largest trading partners—Canada and Mexico—Congress should insist on playing a central role. It should make it clear that the president does not have the authority to act without the express authorization of Congress.

In the history of the domestic politics of trade, the breakthrough announced this week on the United States-Mexico-Canada Agreement (USMCA) is a genuine milestone. Following intensive negotiations—involving House Democrats, the Trump administration, labor unions, and the governments of Mexico and Canada—the three countries announced an agreement that will now lead to the ratification of a new trade architecture for North America. Robert Lighthizer, the U.S. trade representative, can fairly claim to have taken a big step in his promise to restore bipartisanship to U.S. trade policy. Ironically, however, the breakthrough came the same day in which the architecture for global trade—the World Trade Organization (WTO)—was plunged into the greatest crisis of its quarter century history as a result of U.S. intransigence. The United States has crippled the WTO’s capacity to resolve trade disputes among member nations, leaving the future of the organization in serious doubt. The question now—can the shaky new U.S. consensus on trade open the door to agreements with other countries? Or has the United States condemned itself to negotiations only with countries so highly dependent on the U.S. market, like Mexico and Canada, that they will submit to one-sided deals? Robert Putnam, the political scientist, famously argued that international negotiations are a “two-level game.” For international agreements to be reached, governments need not only to negotiate with other governments, but with their own domestic constituents. Agreements can break down at either level. For trade negotiations, the domestic side of that bargain has been weakening steadily in the United States for some three decades. When the Tokyo Round global trade agreement was ratified by Congress in 1979, the deal passed by a vote of 90-4 in the U.S. Senate, and 395-7 in the House of Representatives. The free trade agreement between the United States and Canada, passed in 1988 was nearly as popular. But the North American Free Trade Agreement (NAFTA), the predecessor to USMCA, passed by just 234-200 when it was put to a vote in the House in 1993. A majority of Democrats voted against their own president, Bill Clinton, in opposing the deal. From there, Democrats became increasingly skeptical of trade. Republican President George W. Bush won House support for fast-track trade promotion authority by a single vote in 2001, with just twenty-one Democrats voting in favor. The Central American Free Trade Agreement (CAFTA) passed by two votes in 2005 with the support of just fifteen Democrats. Labor union opposition to the Trans-Pacific Partnership (TPP), a huge deal that would have freed up trade among the United States, Japan, and ten other Asia-Pacific nations, was a big reason that Democratic president Barack Obama could not get the agreement through Congress before he left office. The newly-minted President Donald Trump pulled the United States out of the deal on his third day in the White House, calling it a sell-out of American interests. In the context of that history, the new USMCA is a big deal indeed. Democratic House Speaker Nancy Pelosi has voiced her strong support. AFL-CIO President Richard Trumka has endorsed the deal, the first time labor unions have backed any trade pact since the tiny U.S.-Jordan deal in 2001, and the first time they have supported any trade agreement of consequence since the Kennedy Round of the General Agreement on Tariffs and Trade in the 1960s. The deal came after a long back and forth between House Democrats and the Trump administration, in which Lighthizer supported the Democrats on issue after issue. The new USMCA includes a long wish list of Democratic trade priorities, including tighter rules of origin for car manufacturing, the virtual elimination of investor-state dispute settlement, intrusive provisions aimed at strengthening independent labor unions in Mexico, stronger protections for environmental laws, and weakened protection for pharmaceutical patents. Pelosi and the House Democrats repeatedly praised the Trump administration’s willingness to work with them on the deal. The politics have changed profoundly in the Republican Party as well. Had a Democratic president tried to push through such changes in USMCA, Republicans would have denounced the deal as a socialist abomination. It goes much further to address Democratic concerns than Republicans and their big corporate backers had ever been willing to consider. Many Republicans opposed Obama’s TPP, for example, because it was seen as too weak in protecting the interests of pharmaceutical companies, but the USMCA does even less for the drug companies than TPP. Yet Republicans will ignore the complaints from the industry and vote for the deal anyway. Trump has remade the GOP into a party of economic nationalism, and his congressional supporters will follow lockstep in approving the USMCA. What does this mean for the rest of the world? It will not have gone unnoticed that Canada and Mexico had to negotiate twice to get this deal—first with the Trump administration, and again with House Democrats. Mexico in particular was forced to swallow a series of provisions on labor rights that could be seen as threats to Mexico’s sovereignty. But both Mexico and Canada are so dependent on the huge U.S. market that they had no choice but to find a way to yes. Richard Neal, the Democratic chairman of the House Ways and Means Committee, said candidly: “They conceded just about every point we asked for.” He went on to say the USMCA would now be “a template for future trade agreements.” But if this new hybrid of Trumpian nationalism and Democratic progressivism is what it now takes to do trade deals with the United States, there may be very few takers. China, for instance, has so far resisted the Trump administration’s demands for wholesale reforms to its economic model—demands that enjoy widespread support among both Republicans and Democrats. The European Union would support many of the Democratic objectives on labor, environment, and investor rights, but has resisted Trump’s demands on agriculture and the U.S. trade deficit with Europe. In the WTO, the Trump administration’s complaints over what was seen as over-reach by the Appellate Body, the final court of appeal in trade disputes, were shared by the Obama administration. But the United States has been unable to persuade other WTO members to undertake big reforms, and instead has let the Appellate Body die by refusing to permit the appointment of new judges. Democrats in Congress have yet to raise a whisper of protest. And so other countries are now scrambling to find new ways to resolve trade disputes among themselves rather than acceding to U.S. demands. The genius of Putnam’s theory was to show that international agreements only come about, and can only be sustained, when both levels—the domestic and the international—line up properly. With the USMCA deal, the United States may have found a way back to bipartisan consensus on trade. But it may also be a very lonely spot.

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