Observers Say NAFTA Changes Should Appeal to Democrats
The scaling back of the investor-state dispute system, a wage component to rules of origin and a more enforceable labor and environmental standard all address Democrats' complaints that free trade erodes American workers' wages and jobs and privileges corporations over citizens, said Edward Alden, a senior fellow at the Council on Foreign Relations. "The politics of this are sort of fascinating here," he said of the new U.S.-Mexico-Canada Agreement.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
While Democrats and unions have appreciated the moves, many in the U.S. have said they're still concerned that writing labor standards into a chapter rather than a side letter is not enough. Rep. Sandy Levin, D-Mich., is saying that Democrats won't vote for the new NAFTA unless Mexico's Senate passes implementing legislation to end protection unions and support the right to collectively bargain and strike.
Shannon O'Neil, a senior fellow for Latin American studies at CFR, said that vote in Mexico could happen in the next six months. "I think that would be possible that we would see that move forward, and particularly if it mattered to moving NAFTA through Congress," she said on a conference call with reporters Oct. 2.
Levin said he knows that Andres Manuel Lopez Obrador's administration desires to help Mexican workers. He said if that were to pass -- and there were "concrete results in legislation and in practice" -- that would be very important to garnering Democratic support for ratification. He said he believes Democrats will win the majority in the House of Representatives in November, and that the new majority will be "dedicated to the proposition that trade should not be based on outsourcing" to the lowest common denominator. "If NAFTA 25 years ago had included an enforceable labor and environmental standard, the picture in Mexico on wages and the impact on U.S. jobs and wages would have been different." He said he doesn't think there would have been no outsourcing to Mexico, because even with real unions, Mexican wages would still be lower than U.S. pay. But, he said, "I think there would be considerably less than it has been."
He said he believes U.S. Trade Representative Robert Lighthizer sympathizes with that proposition. "I have much more confidence in Bob than I do in the president," he said.
Larry Kudlow, director of the National Economic Council in the White House, speaking to reporters at the White House Oct. 2, said that if Democrats "want to help working folks," they'll vote for USMCA, which is how the White House is referring to the rewritten NAFTA. "You look at it, it's tailor-made for them. It's what they asked for. Republicans will be happy that we got the deal with no disruption, supply chains will continue, a lot of protection of intellectual property, a lot of movement for financial services, for example, which GOP folks wanted. It's a lot in here for both sides. Whether that works out, I don't know. It's a crazy time."
O'Neil said the higher quotas on rules of origin should not change much for Mexico auto manufacturing. "It's almost there already," she said, and it will slow down China's penetration in lower-value auto parts, which is also beneficial to Mexican parts makers. "Overall, I don't see it changing the commerce, the real back-and-forth across the border."
Alden said he doesn't agree with the argument that complying with the more complex and stricter rule of origin will be so onerous that more companies that do assembly in Mexico will choose to import more low-cost parts from Asia or Eastern Europe and prefer to pay the most favored nation tariff. "If companies are betting we'll just eat the 2.5 percent tariff and not worry about the content, that's a somewhat risky bet," he said on the same conference call during which O'Neil spoke.