Leibowitz on Trade: House Votes to Approve USMCA

The implementing legislation has received almost no scrutiny from Congress. The House was very anxious to vote on something other than impeaching President Trump before going home for Christmas and New Year’s. 

The bill now goes to the Senate. The Finance Committee, which has jurisdiction over trade matters, will mark up the implementing bill on Jan. 6, 2020. It will then be placed on the Senate calendar. Senate Majority Leader Mitch McConnell (R-Ky.) has said the bill will be voted on in the Senate after the impeachment trial of President Trump. That means the approval schedule for USMCA will not be known for a while.

The USMCA features a number of changes from NAFTA, as I’ve discussed before. Protectionist impulses are much more evident in USMCA than they were in NAFTA. However, the bipartisan coalition that supported USMCA in the House was enlarged by these very same protectionist impulses. Now that we have a formula for making trade deals, at least we can start to make progress. The same sort of calculation is necessary for other trade agreements (including the U.S.-UK negotiations, which are coming up in 2020) and WTO reform, which needs to be on the front burner right away if we are to avoid trade “gunfights in the streets.” 

I would much prefer a more orderly and liberalizing trend for trade deals—many people are of that view. USMCA as agreed to by the House of Representatives has a lot of trade protection in it—labor and environment provisions, U.S. monitoring of labor practices in Mexico, protection for North American steel producers (not just U.S.) by requiring more steel to be “melted and poured” in North America, increased origination requirements, etc. In fact, the Congressional Budget Office projected additional duty collections in the U.S. of $3 billion over 10 years because auto makers will prefer to pay ordinary tariffs on autos and auto parts to increasing their North American content. 

With all these problems, it is still better to have USMCA as it is than to have no NAFTA at all. The progress of our economy and national security requires accommodating people who disagree with us. The old cliché that “no deal is better than a bad deal” is one of those phrases that does not help solve real-world problems. USMCA is flawed, to be sure. But it has the virtue of moving the ball forward.

I think we are in for an eventful 2020. I look forward to discussing the issues with you over the coming year. 

Lewis Leibowitz

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