President Donald Trump is eager to show off a big policy win during his impeachment trial by signing into law a major rewrite of the rules of trade with Canada and Mexico.
Trump made renegotiating the North American Free Trade Agreement a priority during his 2016 campaign, although trade experts say the impact of the new U.S.-Mexico-Canada Agreement will be modest. He will sign the bill Wednesday.
Canada and Mexico already represent the top two export markets for U.S. goods. But the pact, along with the signing of a “phase one” agreement with China, dials down trade tensions that contributed to slowing economic growth globally.
The leaders of the three nations signed the new pact in late 2018. Legislation implementing the USMCA received overwhelming, bipartisan support in Congress after several months of behind-the-scenes negotiations between Democratic lawmakers and the Trump administration.
Still, it appeared that prominent Democratic lawmakers were left off the White House guest list for Wednesday’s event. The snub came after the Democratic-led House impeached Trump.
“The White House hasn’t invited House Democrats to their USMCA signing ceremony. But we’ll be well represented in the huge changes to the original USMCA draft that Democrats wrested out of the administration on labor, prescription drugs, environment and enforcement mechanisms,” said Henry Connelly, a spokesman for House Speaker Nancy Pelosi.
Trump showcases the agreement as “a new model of trade for the 21st century.” Speaking to supporters at a New Jersey rally on Tuesday night, Trump said: “Tomorrow we will replace the NAFTA nightmare, one of the worst trade deals ever in history.”
NAFTA, which took effect in 1994, tore down trade barriers between the three North American countries, and commerce between them surged. But Trump and other critics said NAFTA encouraged factories to leave the United States and relocate south of the border to take advantage of low-wage Mexican labor.
Trump threatened to leave NAFTA if he couldn’t get a better deal, creating uncertainty over regional trade.
His trade negotiator, Robert Lighthizer, pressed for a revamped pact designed to bring factory jobs back to the United States. USMCA, for example, requires automakers to get 75% of their production content (up from 62.5% in NAFTA) from within North America to qualify for the pact’s duty-free benefits. That means more auto content would have to come from North America, not imported more cheaply from China and elsewhere.
At least 40% of vehicles would also have to originate in places where workers earn at least $16 an hour. That would benefit the United States and Canada — not Mexico, where auto assembly workers are paid a fraction of that amount.
The independent U.S. International Trade Commission last year calculated that USMCA would add 0.35%, or $68 billion, to economic growth and generate 176,000 jobs over six years — not much of a change for a $22 trillion economy with 152 million nonfarm jobs.
“It’s a blip,” said Syracuse University economist Mary Lovely, who studies trade. “The main thing is what it isn’t: It isn’t a continuation of uncertainty, and it isn’t a major disruption” to business.
Critics include environmental groups concerned that the agreement does not address global warming. Some conservatives say the agreement will make cars and other products more expensive for consumers.
The president wasn’t wasting any time highlighting the deal in battleground states that will determine who wins this year’s presidential election. He will travel Thursday to Michigan, where some of the state’s auto workers should benefit from a deal that encourages more manufacturing in the United States.