The deal is an update of the 1994 North American Free Trade Agreement that eliminated nearly all tariffs on goods traded between the three nations. The USMCA made two big revisions to the prior agreement: First, it updates a lot of provisions around intellectual property, pharmaceuticals and the digital economy. Second, it includes more environmental and labor protections.
Here’s a rundown of the winners and losers from the USMCA. (For a rundown on what’s in the deal, click here).
President Trump — This is a clear win for the president. He got a legit, comprehensive deal done with two foreign countries and Democrats, who are currently trying to impeach him. He can also say he delivered on a key campaign promise: to renegotiate or “terminate” NAFTA. The deal should be a positive for the U.S. economy, another boost in an already improving economic picture for 2020. It also gives him confidence and momentum in his trade battle with China.
Democrats — House Speaker Nancy Pelosi (D-Calif.) is also having a good day. Democrats get to show America that they are capable of doing things beyond impeachment. They also wielded a lot of leverage during the negotiations, forcing Trump — as well as Mexico — to accept more stringent enforcement of labor rights in the final deal. Pelosi is touting that Democrats helped make the deal “infinitely better,” a play to her base.
Labor — Labor unions, especially AFL-CIO President Richard Trumka, really pushed hard here. Trump’s top trade negotiator consulted them frequently during the original USMCA deal in 2018, and unions stood their ground in 2019 to force even more favorable provisions to ensure U.S. jobs don’t flee quickly to Mexico. The result is that the USMCA is expected to create 176,000 new jobs in the United States, and labor rights are poised to expand in Mexico. A committee will monitor Mexico’s progress, and if the nation fails to achieve certain benchmarks, there will be punitive action.
American CEOs — Business leaders finally get some certainty on trade. It’s not as big of a deal as U.S.-China, but it’s good to no longer have the possibility out there that Trump could just tweet that the United States is pulling out of NAFTA, a situation that would have resulted in chaos. Signing the USMCA is expected to be a small boost to the economy.
Lighthizer — U.S. Trade Representative Robert E. Lighthizer has gotten the biggest U.S. free-trade deal to the finish line since 1994. It’s no small task, and he managed to do it in a way that has about everyone celebrating.
Canada — The Canadians managed not to cave much to Trump. In the end, they had to open up their dairy market a bit, but they managed to keep the Chapter 19 dispute settlement process, which helps dodge U.S. courts on most trade-related issues. Canadian workers are also likely to benefit from the more stringent labor requirements, especially that at least 30 percent of autos must be made by workers earning more than $16 an hour.
Mexico — They had to give the most in the negotiations among the three nations. Their economy is technically in a recession now, and they wanted Trump off their backs. They struck the best deal they could, but the clear thrust of the USMCA is to make it harder for companies (especially in the auto industry) to close up factories in the United States and Canada and move entirely to Mexico, where labor costs are cheaper.
China — This is likely a negative for China. It gives Trump and Lighthizer momentum on trade. Since Trump already has one big win on trade heading into the 2020 presidential election, there’s less pressure on him to make a deal with China now.
The MAGA trade agenda — The USMCA is a win for Trump politically. But his goal of revolutionizing American’s trading relationships didn’t happen here, as my colleague David Lynch explains. GOP Sen. Charles E. Grassley (R-Iowa) famously said, “95 percent of what we’ll be voting on is the same as NAFTA." That quote referred to the USMCA deal in 2018. It’s probably more like 85 to 90 percent now, but the bottom line is Trump didn’t burn up NAFTA. He made some modest tweaks.
Pharmaceuticals — Last year’s USMCA deal gave a certain type of drug known as “biologics” 10 years of exclusivity on the market. Democrats say this is now gone, a blow to drug companies that wanted more years to be able to charge higher prices. A fact sheet Democrats provided also says that pharma companies won’t get three additional years of patent protection when they submit paperwork about a new use of a drug.
U.S. car buyers. Economists and auto experts think the USMCA is going to cause car prices in the United States to rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore. It’s unclear how much prices could rise (estimates vary), but automakers can’t rely as heavily on cheap Mexican labor now, and there will probably be higher compliance costs.
Farmers — The biggest relief for farmers is having certainty that they can continue selling their products to the United States’ two largest agricultural export markets (Canada is No. 1, Mexico is No. 2). The USMCA also allows U.S. dairy farmers to sell more milk products (everything from milk powder to ice cream), eggs and turkey to Canada. But most of these gains were part of the Trans Pacific Partnership, a deal Trump pulled out of in 2017, delaying farmers’ greater access to Canada.