Getting Democrats to “Yes” on Trump’s New NAFTA

President Trump is apparently a trade alchemist. He’s taken the core of NAFTA (the “worst trade deal ever”), liberally sprinkled in modern rules from the Trans Pacific Partnership (a “potential disaster”), and created a “brand new” trade deal — the US-Mexico-Canada Agreement (USMCA).

by Ed Gerwin, Senior Fellow, Trade and Global Opportunity| PPI

Trump’s hyperbole aside, the USMCA, while not perfect, would do a creditable job of preserving the essential rules of the road for North America’s highly integrated, $22 trillion economy. It would also update the decades-old NAFTA by, among other things, adding enforceable labor and environmental rules, promoting digital commerce, and cutting red tape for small business. Given Trump’s years of railing against NAFTA and repeated threats to terminate the Agreement, this is a positive development.

For the USMCA to enter into force, it must be approved by Congress, including the Democratic-controlled House. In recent weeks, Trump hasn’t been helping this process. Insulting and trying to bulldoze House Democratic leaders and threatening damaging new tariffs on Mexico are hardly constructive strategies.

So far, however, most Congressional Democrats are holding their cards closely. Many in the Democratic leadership are consulting quietly with Administration officials and key stakeholders in an effort, in the words of Speaker Pelosi, to “get to ‘yes’” on the USMCA. They’re seeking to better understand the Agreement and to improve its terms, operation, and enforcement. Key pro-trade Democrats have emphasized that the Administration still has work to do to earn their votes.

Other Democrats face an understandable political dilemma — whether to provide a seeming “win” to a president who’s extraordinarily unpopular with Democrats.

Of course, many in the Party’s anti-trade wing would rather loudly re-litigate stale decades-old debates on NAFTA. But a backward-looking, “party of no” approach to North American trade is increasingly out of touch with economic reality and the communities that many Democrats represent.

Twenty-five years after NAFTA, open trade has created a new reality — an integrated North American economy woven together by longstanding relationships, extensive supply chains, robust transport networks, and $3 billion in daily two-way trade. This trade is vital to communities throughout America. Canada is the top export market for 33 states, while Mexico is the #1 export destination for six more, including California and Texas. Overall our neighbors buy a third of U.S. goods exports. This extensive trade supports an estimated 12 million American jobs.

Terminating NAFTA — as Trump has repeatedly threatened — would bring economic chaos to American companies and communities, while causing the near-term loss of potentially millions of jobs nationwide.

It’s critical that Democrats move on from old NAFTA battles and “get to ‘yes’” on the USMCA. Even longtime NAFTA critic Donald Trump has reluctantly come to understand America’s reliance on North America’s integrated economic platform. If Democrats scuttle a deal to preserve and update that platform, they’ll own the serious economic consequences.

Maintaining — and modernizing — a solid North American trade platform is especially essential in an increasingly uncertain global economy. America needs strong trade partners as other countries forge preferential trade deals and as China aggressively captures markets and resources through programs like its “Belt and Road” initiative. As American companies strategically decouple from China, Mexico should be a preferred landing spot for their operations, since Mexico’s exports average about 40 percent U.S. content — far more than China’s.

At the same time, Democrats should use their considerable leverage to assure that the USMCA — and accompanying legislation — better achieves important goals. The independent U.S. International Trade Commission has found, for example, that the USMCA’s labor provisions should improve wages and labor conditions in Mexico and the region, “if these provisions are enforced.” Democrats should continue to advance constructive ideas to assure, among other things, that the USMCA’s enforcement system is workable and effective and that U.S. trade enforcement is better funded.

If Democrats can address concerns with the USMCA, building Democratic support might not be as challenging as it appears. According to Pew, 72 percent of Democrats believe NAFTA has generally been good for America. For Democrats representing trade-dependent purple and red districts, supporting the USMCA could also underscore their independence from Democratic anti-trade orthodoxy.

On tariffs, climate, and other vital issues, President Trump has done little more than sow global chaos. A modern update to NAFTA, on the other hand, would offer a measure of stability and predictability that American businesses, communities, and workers — and Democrats — should welcome.