SIM REPORT: North America, Issue 3

UNITED STATES, CANADA & MEXICO: US parties’ dispute hinders ratification of USMCA

Approximately one year on from the leaders of the US, Mexico and Canada agreeing to the new USMCA trade pact, the deal has still not been ratified by either the US Congress or Canada’s parliament. The agreement, which intends to supersede the 25-year-old NAFTA deal, is largely similar to the previous pact but contains several important sector-specific provisions. Industries most affected by the terms of the new pact include agriculture, manufacturing, timber, and the automotive sector. Crucially for corporates operating in North America, the deal mostly maintains the high level of integration between the region’s economies.

While the agreement received overwhelming backing from the Mexican senate in its ratification vote in June, progress on ratification has been slow in Washington and Ottawa. In Canada, the delay has mostly been caused by the government’s desire for progress on the accord to match that in Washington, while it has also been disrupted by the recent federal election. The victory of Prime Minister Justin Trudeau’s Liberal Party in the polls indicates that the pact’s ratification will likely be straightforward; however, the Liberals will need to win the support of opposition lawmakers to approve the USMCA.

The most serious obstacles to the deal’s ratification are in Washington. While both the Republican Party of President Donald Trump and the opposition Democratic Party support the agreement, the USMCA’s ratification has become mired in the country’s polarised and bitterly partisan politics. While leading Democrat and lower house speaker Nancy Pelosi has said that the two sides are ‘within range’ of reaching agreement on modifications to the deal which would satisfy the Democrats, the speed of its passage through the opposition-controlled House of Representatives is largely determined by the Democrats’ political calculations, particularly in light of the 2020 presidential election. Despite the Democrats demanding new provisions to improve job security, prevent excessive prescription drug prices and protect the environment, the most significant obstacle to bipartisan co-operation is an ongoing impeachment inquiry against Trump.

The Democrat-led impeachment inquiry, which examines allegations that Trump sought political favours from the Ukrainian government in exchange for US military aid, has dominated politics in Washington since it was launched in September. On 24 November, Trump described the USMCA as being ‘dead in the water’ due to Congress’ focus on the impeachment inquiry. This is despite repeated calls for the parties to put aside partisan disputes and approve the USMCA. On 22 November, Mexican President Andrés Manuel López Obrador urged both major parties to work together to approve the agreement. Away from party politics, industry groups, particularly in the agriculture sector, have repeatedly called for ratification. In one case, the National Pork Producers Council launched a campaign known as ‘It’s Pork O’clock Somewhere’, highlighting the ways in which pork is enjoyed across North America; in 2018, more than 40 per cent of US pork exports went to Mexico and Canada. These calls are likely to grow louder in the one-month outlook, amid concerns among industry bodies that ratification is unlikely in a crucial election year.

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