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After much back and forth, USMCA relief is here at last

Campbell Clark, The Globe & Mail
December 10, 2019

This is the end of the lingering psychodrama over replacing NAFTA. The deal signed Tuesday isn’t a massive overhaul of the revamped North American trade deal agreed to last fall.

The extra rounds of negotiations tacked on after U.S. President Donald Trump signed the United States-Mexico-Canada Agreement were triggered by Democrats who wanted to be able to claim they’d fixed the President’s deal by securing changes from Mexico that will please U.S. labour unions. It wasn’t about Canada.

And Ottawa didn’t have to fret too much, because in the meantime, it still had the North American free-trade agreement. Both Mr. Trump and the Democrats in the U.S. Congress had reasons to make a deal – in the end, it wasn’t a total coincidence that it was done just as Congress announced articles of impeachment against the President.

But now it’s over. Again. The lingering questions about Canada’s most important trading arrangements can be put to bed. Probably.

Relief. That has been the strategic goal of Canada’s North American trade negotiations since Mr. Trump came to office. The USMCA, signed last year, was a sort-of victory because it didn’t involve major concessions.

Business groups such as the Canadian Chamber of Commerce welcomed the signing of the amended deal, arguing it would provide more certainty for investors. There wasn’t much reason to worry that there’d be a new round of NAFTA panic, but there’s still relief it’s over.

“Anybody who has been making investments knows this was a matter of time,” said Flavio Volpe, the president of the Automotive Parts Manufacturers’ Association. “It’s a question of how long you want to circle the airport.”

There are still theoretical risks for ratification of the agreement, but political reasons why it will get done.

In the U.S., Democrats had qualms about voting for a new North American trade deal because NAFTA was a dirty word to unionized workers. Now they can tell workers they have secured a whole series of measures to enforce union rights and wage increases in Mexico. And they have another, bigger political fight on their hands.

If Democrats don’t ratify the USMCA, Mr. Trump will campaign in the Midwest telling workers the Democrats left them stuck with the bad old NAFTA.

More than that: Mr. Trump has been arguing that the Democrats are so obsessed with impeaching him that they can’t get the USMCA done. House Speaker Nancy Pelosi wants to get it out of the way.

In Canada, Bloc Québécois Leader Yves-François Blanchet said he would not support the deal because Tuesday’s amendments added new protections for steel used in cars, but didn’t extend the same benefits to Canadian aluminum – a large industry in Quebec.

In theory, Mr. Blanchet could team up with the NDP and the Conservatives to defeat the government to derail the trade deal.

But aside from the political risk of going into a snap election over the trade deal, it could spark a rift with Quebec’s popular Premier François Legault – he may not want to see the USMCA scuttled, and Mr. Trump threatening to tear up NAFTA all over again.

It is certainly true that the aluminum industry is not happy with the new deal. They didn’t lose anything that was agreed to last October, but they didn’t gain the same protection the steel industry just won.

The new amendments specify that in time, steel used in cars will only be deemed to be of North American origin if it is melted and poured in the U.S., Canada, or Mexico – so Mexican companies will find it harder to fabricate car parts out of Chinese steel. But the Mexicans, who made most of the concessions in the latest negotiations, weren’t willing to make the same deal for aluminum.

Most of the new amendments negotiated between the U.S. and Mexico gave Canada things it wanted. Intellectual-property protections on certain pharmaceuticals were eased, which will make expensive drugs cheaper. Some loopholes in dispute-settlement mechanisms were tightened. Provisions for labour reforms in Mexico please Canadian unions, too.

Most of all, it’s that the drama is done. The lingering fear that Mr. Trump might be back to threaten NAFTA again, or that Ms. Pelosi’s Democrats might open a surprise chapter, is over. Phew.

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