Although the United States has reached an initial agreement with Mexico under the new United States-Mexico Trade Agreement, Washington state trade representatives say they are concerned that Canada has not yet been included in trade negotiations to replace the North American Free Trade Agreement (NAFTA) and worry that the country’s absence will negatively affect trade markets.
The new deal contains much of the same protections as NAFTA and includes provisions related to labor standards and the modernization of global trade. While the agreement might proceed if Canada is left out, Congress was expecting President Donald Trump to include both neighboring NAFTA countries.
It’s no surprise that Trump has aspired to replace NAFTA. While on the campaign trail, Trump deemed NAFTA “the worst trade deal ever made,” saying it has had a negative effect on U.S. manufacturers. He openly discussed the possibility of destroying the agreement and renegotiating with Canada and Mexico. More recently, however, Trump threatened to leave Canada out of a new trade deal if it could not come to an agreement with the U.S.
Washington agricultural leaders say they are cautiously optimistic of the preliminary agreement with Mexico, and they hope a firm agreement can be made soon since the uncertainty caused by the trade negotiations has been harmful to agricultural markets.
“The president’s declaration of a new agreement is a lot of frosting and not much cake, particularly when it comes to agriculture.” Bill Bryant told Lens. “He is talking about how we will reduce or eliminate all tariffs and we already have that.”
Bryant was the Republican gubernatorial candidate who ran against Governor Jay Inslee during the state’s 2016 election. He was an unpaid advisor to both George H. W. Bush’s and Bill Clinton’s administrations during the negotiations of NAFTA, working closely with the U.S. Department of Agriculture (USDA) and the U.S. Trade Representative. Under the George W. Bush administration, Bryant sat on the advisory board of the U.S. Export-Import Bank representing agriculture.
Bryant said the new agreement does nothing to remove Mexican tariffs placed on Washington state agriculture that resulted from Trump’s tariffs on Mexican aluminum and steel which took effect June 1, 2018. The agreement also falls short on protecting agricultural products, he said.
“Some of the real problems such as the tariffs on apples that are in retaliation…those have not been addressed in the course of these negotiations.”
The U.S.-Mexico Trade Agreement includes new language on intellectual property which Bryant said was needed, however some of that language was already present in the Trans-Pacific Partnership (TPP) before President Trump withdrew the U.S. The new trade deal also includes provisions on the environment and new labor standards.
One large difference from NAFTA is the inclusion of labor rules which would require U.S. auto companies assembling cars in Mexico to use American car parts and would mandate that 40 percent of those cars be made by workers earning at least $16 per hour.
Congress gave President Trump the authority to renegotiate NAFTA but did not permit him to work a bilateral agreement.
“A legal argument could be made that if Trump sends up an agreement to the Hill without Canada that it would be inconsistent with his negotiation authority and Congress could make amendments,” said Bryant.
However, it would be up to Congress whether it would enforce its own rights.
“I think there would be serious ramifications for U.S. supply chains to have an agreement which did not include Canada. I don’t understand why it wouldn’t…we have a trade surplus with Canada.”
Bryant also found fault with Trump’s decision not to include members of Congress on the negotiations with Mexico.
Trump tweeted Sept. 1 that “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere with these negotiations or I will simply terminate NAFTA entirely & we will be far better off…”
“The NAFTA is incredibly important to Washington State, so there is a huge interest in making sure NAFTA is preserved and improved” in the new agreements, Lori Otto Punke, President of the Washington Council on International Trade (WCIT), told Lens.
Washington state good exports into Mexico increased 700 percent and exports to Canada grew 200 percent since NAFTA was enacted. The agreement resulted in 330,000 jobs for Washington state employees relying on NAFTA partners and trade between its countries.
“Given the bilateral trade relationship between Washington and Mexico, we know having a good NAFTA agreement in place is imperative,” said Punke.
The current details on the U.S.-Mexico Trade Agreement are unclear because of several moving pieces.
Industries within the state are monitoring the discussions closely, she added, and many are concerned about the uncertainty of the agreement at this stage.
“I have a hard time seeing an agreement coming to fruition from a U.S. lawmaker if Canada isn’t included since Congress wouldn’t agree with it,” said Punke.
Washington state trade stakeholders will be focusing their efforts on the market access issue for goods, specifically for agriculture and business services. She added that other areas of importance for Washington state include digital trade and e-commerce updates and barriers that inhibit agricultural trade.