House Democrats and the White House have a deal to move forward with USMCA trade agreement

Key Points
  • Democrats have reached an agreement with the Trump administration on moving forward with the USMCA trade agreement. 
  • House Democrats and the White House have worked for more than a year to iron out concerns about enforcement of labor and environmental standards under the replacement for NAFTA. 
Pelosi: Revised USMCA is better than the original version and NAFTA
Pelosi: Revised USMCA is better than the original version and NAFTA

House Democrats and the Trump administration have reached an agreement to move forward with the White House's replacement for the North American Free Trade Agreement, top Democrats said Tuesday.

The two sides had worked for more than a year to resolve Democratic concerns about enforcement tools for labor and environmental standards under the new deal, known as the United States-Mexico-Canada Agreement. House Democrats, President Donald Trump, top Senate Republicans and labor leaders all cited progress toward a deal this week.

The Trump administration needs to submit ratifying legislation to Congress for the House to move forward with approving the agreement. Once the White House submits text — it could do so in the coming days — a 90-day window to approve USMCA starts.

The three countries' representatives — U.S. Trade Representative Robert Lighthizer, Canadian Deputy Prime Minister Chrystia Freeland and Mexican Deputy Foreign Minister Jesus Seade — signed the revised deal on Tuesday afternoon in Mexico City.

The deal as signed last year made a few key changes from NAFTA, which took effect in 1994. U.S. farmers got better access to the Canadian dairy market, rules of origin for auto parts became more strict, nearly half of automobile parts had to be produced by workers who make at least $16 an hour and digital trade and intellectual property rules were updated, among other provisions. Still, Democrats fought for measures they said would better prevent outsourcing of U.S. jobs to Mexico.

Speaker of the House Nancy Pelosi and House Ways and Means Committee Chairman Richard Neal(L), Democrat of Massachusetts, speaks about the US - Mexico - Canada Agreement, known as the USMCA, on Capitol Hill in Washington, DC, December 10, 2019.
Saul Loeb | AFP | Getty Images

In a news conference Tuesday, Democrats highlighted the provisions they pushed to include in the revised USMCA. House Speaker Nancy Pelosi said the new agreement is "a victory for America's workers" and "infinitely better" than what the administration originally proposed. House Ways and Means Committee Chairman Richard Neal, D-Mass., who led his party's talks with the Trump administration, called it a "triumph" for organized labor and "workers everywhere across America."

In a statement, Lighthizer — the lead Trump administration negotiator — said the sides "reached a historic agreement on the USMCA" that "will benefit American workers, farmers, and ranchers for years to come." He added that it "will be the model for American trade deals going forward."

The House could vote to ratify the bill before the end of the year, when a likely impeachment trial in the Senate and the 2020 election will take up more of Washington's attention. The White House and business groups have pushed for ratification in 2019 in part because the lack of an agreement adds to the uncertainty farmers and other businesses face from the administration's trade conflicts around the globe.

The Senate will likely take up USMCA ratification after Trump's impeachment trial in the chamber, Senate Majority Leader Mitch McConnell, R-Ky., said Tuesday. He said he does not expect the Senate to start the trial before next year.

In tweets Tuesday morning, Trump said USMCA is "looking good" and will benefit farmers, manufacturers, the energy industry and labor unions. He added that there appears to be "very good Democratic support for USMCA."

Trump tweet 1

Trump tweet 2

Other Republicans cast the agreement as a victory for Trump. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said Trump "kept his word" to renegotiate NAFTA, "and Americans will enjoy the many benefits of this upgraded trade deal as a result."

In a statement, Vice President Mike Pence said Trump "promised to fight for trade deals that put American jobs and American workers first," and USMCA "does just that."

USMCA deal is a positive for markets, says Cowen's Chris Krueger
USMCA deal is a positive for markets, says Cowen's Chris Krueger

Labor unions, which Democrats count as a key political constituency, had held out support for the agreement as Democrats pushed for tougher labor standards. Earlier Tuesday, the AFL-CIO — a massive federation of unions — announced it would back the agreement. AFL-CIO President Richard Trumka said "the USMCA is far from perfect," but "there is no denying that the trade rules will now be fairer because of our hard work and perseverance."

Auto industry stakeholders such as the American Automotive Policy Council — which represents Fiat Chrysler, Ford and GM — applauded progress toward deal approval. So did business interest groups such as the U.S. Chamber of Commerce, the Computer and Communications Industry Association and the American Chemistry Council.

On Tuesday, the Ways and Means Committee highlighted the "improvements" it said Democrats made to the original USMCA deal. It includes mechanisms to settle labor and environmental disputes, a committee and Mexico-based attaches to monitor compliance with labor standards and penalties on goods and services produced in a way that does not meet labor benchmarks.

Democrats said it will also create methods to monitor whether countries keep up with environmental standards. They added that they secured one of their biggest USMCA priorities — scrapping a provision shielding so-called biologic drugs from cheaper generic competitors for 10 years. Democrats argued the measure would hurt consumers.

Revamping NAFTA, which Trump railed against as a job killer, has been one of the president's top economic and political priorities ahead of the 2020 election. Democrats, who announced two articles of impeachment against Trump earlier Tuesday, also aim to show they can legislate while checking the president's alleged abuses of power.

Momentum behind USMCA appeared to mount early in the week. On Monday, Trump spoke with Canadian Prime Minister Justin Trudeau, and they discussed the "significant progress toward finalizing" the deal, the White House said Tuesday.

House Ways and Means Committee ranking member Kevin Brady, R-Texas, told a House GOP conference meeting Tuesday that Lighthizer will sign the deal in Mexico. Mexican President Andres Manuel Lopez Obrador said the three countries agreed to sign the new agreement Tuesday, according to Bloomberg.

Mexico ratified the version of USMCA that the three countries agreed to last year and will need to approve the new agreement. The U.S. and Canada still need to ratify the deal.

— CNBC's Kayla Tausche contributed to this report

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