President Trump and Congressional Democrats struck a deal Tuesday (Dec. 10) on the U.S.-Mexico-Canada Agreement (USMCA), a reset of the 25-year old North American Free Trade Agreement (NAFTA).
For months, Trump administration officials, led by U.S. Trade Representative Robert Lighthizer, and legislative leaders have battled behind the scenes for changes to the original NAFTA agreement and a preliminary USMCA trade deal agreed to by Canada and Mexico.
The latest USMCA addresses a number of trade issues between the three countries including labor and environmental protections, pharmaceutical privileges, farming and manufacturing guidelines, intellectual property rules, and renegotiation and enforcement mechanisms.
Under the latest version revealed Tuesday, U.S. farmers will get better access to the Canadian dairy market, the American auto industry will be afforded more guarantees on production and pay, and generic drugs must wait 10 years, instead of eight, before they can be produced from patent exclusive protections.
The tentative plan is for Congress to hold a full vote on the deal next week, taking it straight to the floor without holding a markup hearing on it, according to Congressional sources.
Here are some key industry changes and cooperative rules that USMCA will present:
Dairy access: The U.S. will be able to export the equivalent of 3.6% of Canada’s dairy market, up from the existing level of about 1%. In addition, Canada will get rid of the “Class 7” pricing system that was seen as disadvantageous to the American dairy industry.
Other agricultural goods: Canada will give U.S. producers more access to chicken, turkey, and egg markets, as well as allow the sale of U.S. wines at Canada-owned liquor stores. Mexico agreed to allow imports of certain U.S. cheeses.
Automaker rules: Seventy-five percent (75%) of automobiles must be made in one country for it to pass through countries duty-free, up from 62.5%. Additionally, 40% of each car must be produced by workers making $16 an hour or more to avoid duties.
Intellectual property: The copyright period in Canada will be extended from 50 to 70 years after the creator’s death.
Review clause: The USMCA includes a 16-year expiration date and a provision that requires a review of the deal every six years, when it can be extended.
Dispute settlement process: NAFTA’s dispute-settlement system, which allows member countries to bring grievances against other members over allegations of unfair trading practices, will remain the same.
Industry reaction was overwhelmingly positive from state and national trade groups.
“The Arkansas Farm Bureau is very supportive of USMCA,” said Arkansas Farm Bureau President Rich Hillman. “Just last week at our state convention, our delegates reiterated to me the importance of getting this trade agreement ratified as quickly as possible. Canada and Mexico are the nation’s two largest agricultural trading partners. Arkansas agriculture provides more than $20 billion annually to our state’s economy. Passage of USMCA will help stabilize the marketplace and will allow the United States to focus efforts on other important trade agreements around the world.”
“This is a vital piece of legislation for Arkansas businesses,” said Arkansas State Chamber of Commerce President and CEO Randy Zook. “It is a real shot in the arm for Arkansas farm families. Canada and Mexico are our biggest trading partners, and this will be especially important to our farm sector. This is a solid achievement and the Arkansas State Chamber appreciates all of the hard work from the Arkansas delegation to get this moved forward.”
The National Chicken Council (NCC) asked for a vote before Christmas.
“USMCA will maintain and improve market access for U.S. chicken in our top two markets in terms of value, Mexico and Canada,” said NCC President Mike Brown. “It will also positively impact both the U.S. agriculture sector and the broader national economy.
National Association of Manufacturers President and CEO Jay Timmons said his group did not get all it wanted, but was generally supportive.
“Manufacturers support the USMCA, and we are encouraged that the administration and House Democrats have forged a path forward, with the support of Canada and Mexico as well,” Timmons said. “To be sure, as with any agreement of this nature, not every objective that we sought was met. For instance, we are extremely disappointed that the agreement missed an opportunity to set the gold standard for the protection of American-made lifesaving innovations and inventions. Protection of intellectual property is a key principle and critical for the long-term vitality of the manufacturing industry and the men and women who work in our sector. Nevertheless, a ratified USMCA will deliver increased certainty for manufacturers—especially for the two million manufacturing workers whose jobs depend on North American trade.”
“Now with a clear path to USMCA’s ratification, this is an historic victory for truck drivers, motor carriers and the entire American economy,” said American Trucking Associations President Chris Spear. “The vast majority of trade in North America moves on truck, with $772 billion worth of goods crossing our borders with Mexico and Canada every year. USCMA will provide the certainty our industry needs while ensuring the United States remains competitive on the world stage. In a Washington that has been gridlocked by partisan politics, this is a great example of what is possible in creating consensus around good policy.”
ARKANSAS LAWMAKERS SUPPORTIVE
Canada and Mexico are Arkansas’ two top trading partners. A recent report from the World Trade Center Arkansas found that exports to Canada amounted to $1.2 billion and exports to Mexico totaled $870 million in 2018. That accounts for approximately one-third of Arkansas’ total exports.
Overall exports to these two countries support more than 12 million American jobs, including about 120,000 jobs in Arkansas.
“With today’s announced agreement on USMCA, more than 100,000 Arkansas farmers, ranchers, and manufacturers can celebrate increased exports, more jobs, and rising wages in 2020 and beyond,” said U.S. Rep. French Hill, R-Little Rock, a member of the USMCA Republican House Whip Team. “This agreement is a much-needed 21st century update of NAFTA and will keep the United States and our North American markets competitive for decades to come. This trade deal was one of President Trump’s top priorities for the American people, and I want to congratulate him and U.S. Trade Representative, Ambassador Robert Lighthizer on this historic victory.”
“President Trump and Ambassador Lighthizer have fought for and secured a 21st century trade deal for Arkansas and the country. The USMCA provides a strong framework that will enhance market access, create jobs, and unleash new sources of opportunity. Canada and Mexico are two of Arkansas’s top trading partners, and modernizing our trade policies will help foster prosperity for decades to come,” said U.S. Rep. Steve Womack, R-Rogers. “After nearly a year of delay tactics from Democrats, I am pleased that this significant agreement is being advanced. I look forward to voting to support the farmers, ranchers, businesses, and workers who move our economy.”
“USMCA is a trade deal that will increase economic growth by $68 billion. In Arkansas alone, more than 7,000 jobs depend on manufacturing exports to Canada and Mexico. It’s an overwhelmingly bipartisan deal that directly benefits hardworking Americans,” said U.S. Rep. Bruce Westerman, R-Hot Springs. “I’m glad to see Speaker Pelosi will finally hold a House vote on this historic agreement, although I have to wonder why it’s taken her over a year to do it. I’d like to thank Trade Representative Lighthizer, President Trump, and all other administration officials who kept fighting for this deal and kept their promises to the American people.”
“#USMCA will be one of the best improvements to an outdated trade deal that our country has ever seen. The President made it a central component of his platform when he ran for office & he has delivered. Ag-producers and all Americans are thankful for his work. Let’s vote!” tweeted U.S. Rep. Rick Crawford, R-Jonesboro.
“The breakthrough on #USMCA is welcome news. Modernizing our trade deal with Canada & Mexico will deliver wins for farmers, ranchers, manufacturers and businesses in AR and nationwide. Looking forward to reviewing the final details and hopefully getting it across the finish line,” U.S. Senator John Boozman, R-Ark., said in a tweet.
Editor’s note: Michael Tilley, Paul Gatling, and Kim Souza contributed to this report.