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Daniel Dale, Toronto Star, Washington Bureau Chief
Thursday, April 4, 2019
WASHINGTON—A coalition of businesses pushing Congress to approve the new trade deal with Canada and Mexico says the public shouldn’t put too much stock in this month’s official estimate of the impact of the deal on the U.S. economy.
“It’s just a report,” Rick Dearborn, executive director of the Pass USMCA Coalition, said in an interview. “We think the benefits of the deal are crystal clear regardless of what the report shows.”
President Donald Trump has portrayed the deal, which he calls the USMCA, as a transformative development for Americans and a major break away from the original North American Free Trade Agreement, which he calls a “disaster.”
But much of the USMCA consists of the original NAFTA, which eliminated the vast majority of North American tariffs, and trade experts say that some of the changes the USMCA does make — like introducing strict new rules on auto manufacturing — could possibly result in the U.S. International Trade Commission finding that it will have a negative overall impact on U.S. growth.
At best, experts say, the ITC report expected by April 19 is likely to show a very small positive impact.
“He’s been touting this as moving from the worst trade agreement ever to the biggest, best agreement, and there is no way the results of the USITC can be spun to say that the USMCA is anything other than a small change from the status quo,” said Jennifer Hillman, a Georgetown Law professor and a former senior official with the U.S. trade representative’s office.
“The debate in Congress is whether that small change is still worth doing.”
A negative or mediocre conclusion from the ITC could make it harder to convince skeptical Democrats that it is worth taking the political risk of voting for a top Trump priority. Such a conclusion could give members “cover” if they are already predisposed to vote no, said Robert Fisher, a U.S. negotiator for the original NAFTA and now managing director of Hills and Co.
Trump has struggled so far to sell his deal to the Democrats in control of the House of Representatives, who have demanded that negotiations with Canada and Mexico be reopened to accommodate the party’s concerns. Foreign Affairs Minister Chrystia Freeland said Thursday that the talks should not be reopened, arguing that this “could really be a Pandora’s box.”
Dearborn, Trump’s former deputy chief of staff, acknowledged that the finding could be negative or only minimally positive. But he argued that this is because the trade commission might be unable to quantify the benefits of USMCA chapters that did not exist in the original NAFTA, like those on digital trade and small businesses, and USMCA improvements on intangible issues like intellectual property.
“If the report comes out and it’s even remotely positive, I think that’s a big deal. If it looks as if it shows that’s there’s not much of a gain, I think that’s standard for ITC reports,” Dearborn said.
Members of Congress, he said, are not going to say before they vote, “‘Wait a second, gosh, I have to go back and read the ITC report one more time’ … The members already know what’s in USMCA.”
Hillman said it is true that the ITC’s quantitative models are unlikely to be able to incorporate some of the deal’s changes on qualitative matters like the resolution of trade disputes.
Fisher, who said he expected a conclusion that the deal “has virtually no impact no impact on the United States overall,” said legislators are less likely to care about the report’s overall conclusion than about “what it says on the sectors they care about and the impact in their districts, their states.”
The report is mandatory as part of the U.S. ratification process. The ITC is part of the U.S. government but conducts its work independently.
The ITC concluded that the much larger Trans-Pacific Partnership, which included the U.S., Canada, Mexico and nine other countries, would have had just a 0.15 per cent positive impact on the U.S. economy over 15 years and boosted employment by a paltry 128,000 jobs by 2032. That deal was never ratified by Congress, and Trump officially withdrew the U.S. from it.
Trump threw another curveball into the USMCA ratification process on Thursday by threatening to impose auto tariffs on Mexico a year from now if Mexico does not crack down on illegal immigration and drug trafficking into the U.S.
He did not mention that he has already agreed to a deal that effectively exempts Mexico and Canada from tariffs on cars and auto parts. That exemption has already come into effect even though the broader USMCA has not.
“We are not concerned. What has been agreed on the car industry is firm, is not under threat,” said Mexican government official Jesus Seade, Politico reported.
Flavio Volpe, president of Canada’s auto parts industry association, said that trading partners always worry about Trump “backsliding,” but in this case the terms of the deal “are clear and in force.”
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