5 Reasons Why Congress Should Pass USMCA

Submitted by scapriotti20 on Tuesday, October 22nd, 2019, 9,00 AM

 The United States-Mexico-Canada Trade Agreement (USMCA) is a commonsense update to the 25-year-old NAFTA, will benefit American workers and businesses, and is widely popular among stakeholders in all three nations. 

The agreement was finalized almost a year ago on November 30, 2018, yet Democrats continue to sit on their hands and have so far refused to put the agreement to a vote. This is despite Mexico already ratifying the agreement and Canada waiting for the U.S. Congress to act.

Rather than focusing on investigations and impeachment, Speaker Pelosi should bring the USMCA up for a vote.  

Here are five reasons why Congress should pass the USMCA:

1. The USMCA will grow the economy 

The trade agreement will increase wages, increase GDP by $68.2 billion, and create 176,000 jobs, according to the International Trade Commission’s report.  It will also increase U.S. exports to Canada by $19 billion, and to Mexico by $14 billion.  

These positive economic effects are identical to a 4% cut to the corporate income tax, as estimated by the Tax Foundation.  

The Trump administration has already achieved economic successes through international and domestic policies.  Thanks to the 2017 Tax Cuts and Jobs Act and more broadly, deregulatory efforts, wages are increasing 3.4 percent annually, poverty has declined 11.8 percent, and unemployment is at a 50-year low.  Since the 2016 election, the Trump administration has created 4 million jobs and the median household income is at the highest level in U.S. history.

President Donald Trump and Japanese Prime Minister Shinzo Abe signed a trade deal last month that reduced or eliminated most tariffs between the U.S. and Japan.  In addition, President Trump and Chinese President Xi Jinping have achieved a Phase 1 trade agreement, which doubles China’s annual purchase of U.S. agriculture, improves intellectual property rights, and halts the planned 30 percent tariffs on Chinese imports.

The economy is moving in the right direction and the USMCA will further these successes by promoting trade with the U.S.’s largest trading partners.

2. There is broad support for USMCA

USMCA has broad support from Mexico, Canada, and U.S. stakeholders:

  • President Donald Trump has called it the “largest, most significant, modern, and balanced trade agreement in history,”
  • Canadian Prime Minister Justin Trudeau, a member of the centre-left Liberal Party of Canada, said it is “essential for businesses, families, jobs, entrepreneurs, and hardworking people in every corner of our country.” 
  • Mexico ratified the agreement almost unanimously with a 114-4 Senate vote.  Mexico even passed a labor law in April that strengthens independent unions to address concerns raised by U.S. Democrats – a key step for U.S. ratification. 
  • Mexican President Manuel López Obrador, a member of the left-wing National Regeneration Movement Party said, “We think it suits us, that it is beneficial for more foreign investment,” adding that the new trade accord would help create more well-paying jobs in Mexico.
  • The U.S. Chamber of Commerce Chief Executive Thomas Donohue said, “If we came up with a good strong vote on that (USMCA), it would give us a great step forward,” adding his belief that Congress had “enough votes to do it right now.”
  • The Washington Post said in an editorial that passing USMCA will “help stabilize the global economic outlook” and predicted if Pelosi would bring the agreement to the floor, it would pass both houses of Congress.
  • Senate Majority Leader Mitch McConnell (R-KY) and House Minority Leader Kevin McCarthy (R-CA) labeled the agreement, “unambiguously a win for America. It would create new jobs, expand export markets, strengthen protections for workers, and generate billions of dollars in new prosperity,” in a co-authored Wall Street Journal op-ed.

3. USMCA helps farmers, manufacturers, American workers and business

USMCA aids small and medium-sized enterprises, grants broader market access for all three countries, and benefits agricultural producers and manufacturers.  

The agreement establishes the first small and medium-sized enterprises chapter in a U.S. Trade Agreement, which will increase transparency, accountability, and investment opportunities.  International trade supports nearly 39 million jobs (1/5 of U.S. jobs), 12 million of which rely on Canada and Mexico, according to a Business Roundtable study.  These numbers have doubled since NAFTA was signed.  

This number will only increase with ratification of USMCA.

The increased market opportunities for Americans will also increase agriculture exports by more than $314 million.  Through USMCA negotiations, Canada agreed to open market access to American farmers who wish to sell dairy, poultry, and eggs in Canada.  In return, Canada will have access to American dairy and peanut products.  A combination of poor weather conditions and the trade war with China has damaged the agricultural industry.  The industry would benefit from stabilization of international markets, especially the U.S.’s two biggest trading partners that buy close to 2/3 of U.S. agricultural exports.  

Already, the Trump Administration has created over 400,000 manufacturing jobs since the 2016 election, and manufacturing jobs are growing at the fastest rate in over 30 years.  The National Association of Manufacturers (NAM) released a supportive statement in which they say, “By securing the relationship with our North American allies, we are also better positioned to demonstrate a strong and united front against China’s unfair trade practices and end the harm they inflict on manufacturers in America.” 

4. USMCA modernizes and updates a 25-year-old agreement

When the North American Free Trade Agreement (NAFTA) was agreed to in 1994, the world was a dramatically different place. For one, the internet was in its infancy. Additionally, trade within North America was greatly hindered by high tariffs and investment barriers.

Billions of dollars are traded over the internet daily, yet NAFTA does not contain any relevant provisions. USMCA establishes numerous provisions on e-commerce, cross-border data flows, encryption and IP protection that are needed in today’s digital economy.

Before NAFTA, Mexico placed an average of 250 percent more tariffs on U.S. exports than the U.S. did on Mexican imports.  Ratifying NAFTA eliminated tariffs on more than one-half of Mexico's exports to the U.S. and more than one-third of U.S. exports to Mexico.   Facilitating free trade benefits all three states’ economies, but NAFTA does not address current trade problems.

USMCA will maintain and improve the border free trade that NAFTA began, while also establishing provisions necessary for 21st century trade.

The fact is, the global economy has changed. U.S. trade policies need to reflect that.

5. USMCA is crucial for swing states

Not only is the USMCA good for the economy and popular amongst a wide array of stakeholders, it is also a political winner.

31 of the districts Trump won in 2016 now have Democrats in the House, meaning reaching these constituents is important both for the future of the House and for the 2020 presidential election.

Looking towards the upcoming election, swing states are largely invested in international trade.  In 2018, the fourteen swing states alone were responsible for 150.7 billion dollars in exports to Canada and Mexico.  This includes Michigan, Florida, Wisconsin, and Pennsylvania, all 2012 Obama victories turned Trump victories in 2016.

For example, Michigan traded 36.1 billion worth of exports to Canada and Mexico in 2018.  More than 117,400 Michigan jobs rely on this trade.  In Ohio, more than 102,700 jobs rely on this trade and its 2018 Canada and Mexico exports totaled 27.9 billion. Pennsylvania traded 15 billion worth of exports, and 42,900 jobs in the state rely on trade with Mexico and Canada.

More than 2 million American manufacturing jobs depend on trade with Canada and Mexico.  A win for these hardworking Americans could be the moving factor in 2020.

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