Wires

U.S. House set to approve new N. American trade deal replacing NAFTA

David Lawder

WASHINGTON, Dec 19 (Reuters) - The U.S. House of Representatives is set to approve a rewritten North American trade deal on Thursday that includes tougher new labor and automotive content rules than its predecessor but leaves $1.2 trillion in U.S.-Mexico-Canada trade flows largely unchanged.

The vote, which comes a day after House Democrats voted to impeach President Donald Trump, is expected after 1:15 p.m. EST (1815 GMT).

The House Ways and Means Committee advanced the bill to implement the new U.S.-Mexico-Canada Agreement on a voice vote on Tuesday, indicating broad support.

The trade pact, first agreed upon in September 2018, will replace the 1994 North American Free Trade Agreement. Trump has vowed for years to quit or renegotiate NAFTA, which he blames for the loss of millions of U.S. factory jobs.

House Speaker Nancy Pelosi gave USMCA a green light last week after striking a deal with the Trump administration, Canada and Mexico to strengthen labor enforcement provisions and eliminate some drug patent protections.

Pelosi said she was not concerned about Democrats handing Trump a political victory on USMCA as they are trying to remove him from office.

"It would be a collateral benefit if we can come together to support America's working families, and if the president wants to take credit, so be it," Pelosi said during House floor debate. "That would not stand in the way of our passing this."

The changes negotiated by Democrats, which include tighter environmental rules, will also set up a mechanism to quickly investigate labor rights abuses at Mexican factories. They have earned the support of several U.S. labor unions that have opposed NAFTA for decades.

Even some of the most ardent trade skeptics in Congress have voiced support of the deal, including Representative Debbie Dingell, who represents an autoworker-heavy district in southeastern Michigan.

Dingell said in television interviews that she would back the bill, even though she was skeptical it would bring auto jobs back to Michigan.

The new agreement modernizes NAFTA, adding language that preserves the U.S. model for internet, digital services and e-commerce development, industries that did not exist when NAFTA was being negotiated in the early 1990s. It also eliminates some food safety barriers to U.S. farm products and grants U.S. farmers more access to Canada's largely closed dairy market.

But the biggest changes require increased North American content in cars and trucks built in the region, to 75% from 62.5% in NAFTA, with new mandates to use North American steel and aluminum.

In addition, 40% to 45% of vehicle content must come from high-wage areas paying more than $16 an hour - namely the United States and Canada. Some vehicles assembled in Mexico mainly with components from Mexico and outside the region may not qualify for U.S. tariff-free access.

The U.S. Congressional Budget Office estimated earlier this week that automakers will pay nearly $3 billion more in tariffs over the next decade for cars and parts that will not meet the higher regional content rules. (Reporting by David Lawder in Washington Additional reporting by Andrea Shalal in Washington and David Ljunggren in Ottawa Editing by Matthew Lewis)