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Winners and losers in the final USMCA deal

Heather Long

4 hrs ago

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Nearly everyone is claiming it’s a political and economic victory for them. Democrats give it a thumbs up. Some union leaders give it a thumbs up. So do Mexican and Canadian officials. Many business groups, including the U.S. Chamber of Commerce, the Business Roundtable and the Farm Bureau, are also applauding it.

The deal is an update on the 1994 North American Free Trade Agreement that eliminated nearly all tariffs on goods traded between the three nations. USMCA made two big revisions to the prior agreement: First it updates a lot of provisions around intellectual property, pharmaceuticals and the digital economy. Second it includes more environmental and labor protections.

Here’s a rundown of the winners and losers from USMCA.

Winners:

President Trump – This is a clear win for the president. He got a legit, comprehensive deal done with two foreign countries and Democrats who are currently trying to impeach him. He can also say he delivered on a key campaign promise: To renegotiate or “terminate” NAFTA. The deal should be a positive for the U.S. economy, another boost in an already improving economic picture for 2020. It also gives him confidence and momentum in his trade battle with China.

Democrats – House Speaker Nancy Pelosi (D-Calif.) is also having a good day. Democrats get to show America that they are capable of doing things beyond impeachment. They also wielded a lot of leverage during the negotiations, forcing Trump -- as well as Mexico -- to accept more stringent enforcement of labor rights in the final deal. Pelosi is touting that Democrats helped make the deal “infinitely better,” a play to her base.

Labor – Labor unions, especially AFL-CIO President Richard Trumka, really pushed hard here. Trump’s top trade negotiator consulted them frequently during the original USMCA deal in 2018, and unions stood their ground in 2019 to force even more favorable provisions to ensure U.S. jobs don’t flee quickly to Mexico. The result is USMCA is expected to create 176,000 new jobs in the United States and labor rights are poised to expand in Mexico. A committee will monitor Mexico’s progress and if the nation fails to achieve certain benchmarks, there will be punitive action.

American CEOs – Business leaders finally get some certainty on trade. It’s not as big of a deal as U.S.-China, but it’s good to no longer have the possibility out there that Trump could just tweet that the U.S. is pulling out of NAFTA, a situation that would have resulted in chaos. Signing USMCA is expected to be a small boost to the economy.

Lighthizer – U.S. Trade Representative Robert Lighthizer has gotten the biggest U.S. free trade deal to the finish line since 1994. It’s no small task and he managed to do it in a way that has about everyone celebrating.

© Getty Canadian Deputy Prime Minister Chrystia Freeland gestures next to Mexico's President Andres Manuel Lopez Obrador and Mexico's Foreign Minister Marcelo Ebrard, during a meeting at the Presidential Palace, in Mexico City, Mexico December 10, 2019. REUTERS/Henry Romero

Canada – The Canadians managed not to cave much to Trump. In the end, they had to open up their dairy market a bit, but they managed to keep the Chapter 19 dispute settlement process, which helps dodge U.S. courts on most trade-related issues. Canadian workers are also likely to benefit from the more stringent labor requirements, especially that at least 30 percent of autos must be made by workers earning more than $16 an hour.

Losers:

Mexico – They had to give the most of the three nations. Their economy is technically in a recession right now, and they wanted Trump off their backs. They struck the best deal they could, but the clear thrust of USMCA is to make it harder for companies (especially in the auto industry) to close up factories in the United States and Canada and move entirely to Mexico where labor costs are cheaper.

China – This is likely a negative for China. It gives Trump and Lighthizer momentum on trade. Since Trump already has one big win on trade heading into the 2020 presidential election, there’s less pressure on him to make a deal with China now.

The MAGA trade agenda – USMCA is a win for trump politically. But his goal of revolutionizing American’s trading relationships didn’t happen here, as my colleague David Lynch explains. GOP Senator Chuck Grassley (R-Iowa) famously said “95% of what we’ll be voting on is the same as NAFTA." That quote referred to the USMCA deal in 2018. It’s probably more like 85 to 90% now, but the bottom line Trump didn’t burn NAFTA to the ground. He made some modest tweaks.

Pharmaceuticals – Last year’s USMCA deal gave a certain type drug known as “biologics” 10 years of exclusivity on the market. Democrats say this is now gone, a blow to drug companies that wanted more years to be able to charge higher prices. A factsheet Democrats provided also says that pharma companies won’t get three additional years of patent protection when they submit paperwork about a new use of a drug.

Mixed bag:

Farmers -- The biggest relief for farmers is having certainty that they can continue selling their products to America’s two largest agricultural export markets (Canada is number one, Mexico is number two). USMCA also allows U.S. dairy farmers to sell more milk products (everything from milk powder to ice cream), eggs and turkey to Canada. But most of these gains were part of the Trans Pacific Partnership, a deal Trump pulled out of in 2017, delaying farmers greater access to Canada.

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