The Trump administration appears to have threaded a needle with its update of the North American Free Trade Agreement, managing to cheer business interests and Wall Street without alienating labor unions.
But labor leaders say the final deal will need to do more to protect workers to win their support. Without that, the Trump team could be hard-pressed to earn sufficient Democratic votes on Capitol Hill to ratify the pact — a task that will grow both more difficult and more urgent if the party captures one or both chambers of Congress in the midterms.
“The devil’s in the details, and nobody’s got the details,” Rep. Debbie Dingell (D-Mich.), whose Detroit-area district depends on the strength of the auto industry, tells me. “It’s important because it’s the working people of my district who were deeply hurt in NAFTA 1.0. We were without fail one of the losers.” U.S. Trade Representative Robert Lighthizer predicted Monday the measure would pass “with a substantial majority. The fact of the matters is, this is not a Republican-only agreement.”
House Democrats and labor officials identified their chief issue with the revised trade deal, released late Sunday night: The text doesn’t include measures to enforce its worker protection provisions. “It does make meaningful progress,” says Celeste Drake, the AFL-CIO’s trade and globalization policy specialist, pointing to language guarding workers’ right to strike, expanding the definition of the minimum wage, and addressing violence and intimidation of workers. “But those are pretty words on paper unless there’s a real systematic plan to get at how it will be enforced.”
Drake said union presidents want language in the pact itself that addresses the issue — a tall order, since the text released Sunday night is meant to be final. “We’re flexible about how it gets done,” Drake said. “We understand how difficult that would be now; however, we also don’t believe it's impossible.”
Labor interests could settle instead for spelling out enforcement mechanisms in the bill that Congress takes up next year to ratify the deal. Further, labor officials say they are waiting to see whether Mexico adopts legislation to implement its own labor law reforms. In the meantime, House Democratic and labor officials gave Lighthizer and his staff high marks for seeking their input and responding to queries.
The effort by the Trump trade team to keep Democrats in the fold reflects an understanding of how the political sands are shifting at a critical moment. Trade with Canada and Mexico reaches into nearly every corner of the economy, meaning interests from farmers to financial services companies have a stake in the outcome. And with Democrats in poised to make major gains in the midterms, the administration needs to court labor and environmental support, as well.
Senate Minority Leader Chuck Schumer (D-N.Y.) offered Trump some rare acclaim for tackling the issue. “The president deserves praise for taking large steps” to improve NAFTA, he said in a statement Monday. But he also cited “real enforcement of labor provisions” as a top priority. “Labor provisions are good, but too often they are written into trade bills and never enforced.”
And, in a reminder that lawmakers’ trade concerns are frequently more parochial than partisan, said he needs to read the small print dealing with dairy farmers.
“I think they’re going to have to build a coalition to support this, and Democrats are going to be an important and vital part of that coalition,” Dingell said. For her part, she said she is seeking input from the United Auto Workers union, automakers themselves, and auto suppliers.
The UAW is reserving judgment. “We think the idea and concept of the USMCA could have the potential to provide some needed relief for America’s working families,” UAW president Gary Jones said in a statement. But “given the history of loopholes in NAFTA,” he said union officials will wait until “all the pieces are put in place” before rendering a verdict. The Steelworkers and Teamsters struck similar notes in statements that criticized the deal while holding out the possibility of endorsing the final result.
“The American labor community’s initial response to the revised Nafta is considerably more positive than how they’ve judged virtually every other trade pact over the past quarter-century,” The Wall Street Journal's Jacob Schlesinger noted Monday. “A decision by labor leaders not to oppose the agreement, even if they don’t actively support it, could lower political opposition in Congress.”
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— The IMF worries about global growth. The Wall Street Journal's Josh Zumbrun: “International Monetary Fund Managing Director Christine Lagarde is raising alarm bells about the health of the global economy, saying international growth may have plateaued. ‘For most countries, it has become more difficult to deliver on the promise of greater prosperity, because the global economic weather is beginning to change,’ Ms. Lagarde said in a speech in Washington on Monday . . . Ms. Lagarde said another mounting concern is that threats to impose new trade restrictions have been carried out in a number of countries. ‘A key issue is that rhetoric is morphing into a new reality of actual trade barriers,’ Ms. Lagarde said. ‘This is hurting not only trade itself, but also investment and manufacturing as uncertainty continues to rise.’ ”
As business economists project near-term optimism for the U.S. The Associated Press's Christopher Rugaber: “The economy should grow at a healthy pace this year and next, though the Trump administration’s trade policy will likely act as a drag, a group of business economists said. Growth should reach 2.9 percent this year, according to a survey of 51 economists by the National Association for Business Economics, released Monday. That would be up from just 2.3 percent in 2017. And growth is forecast to be 2.7 percent in 2019, the survey found. Overall, the economists are slightly more optimistic than they were when last surveyed three months ago.”
— Quality stocks get crowded. Bloomberg News's Dani Burger: “In the world of the quants, there can always be too much of a good thing. This time, it’s the relentless rally in companies with healthy fundamentals from low debt to high profitability — dubbed quality stocks — driven by investor appetite for defensive assets across the U.S. and Europe . . . Now, this corner of the quantitative kingdom no longer provides refuge because it’s become crowded and pricey, according to Sanford C Bernstein & Co. ‘Quality factors are well bid so may not be as defensive as people expect,’ strategists led by Inigo Fraser Jenkins wrote in a Monday note.”
— Fed rethinks big bank definition. The Wall Street Journal's Ryan Tracy: “The Federal Reserve could broaden the number of banks receiving regulatory relief from Trump-appointed officials under an initiative that changes how it defines a big bank. As part of a series of rule changes still under development, the Fed is preparing to revise asset-size and other thresholds in its capital and liquidity rules ... The changes could lead to lower regulatory costs for some large U.S. banks, including Capital One Financial Corp. , PNC Financial Services Group Inc. and U.S. Bancorp. It is less clear the changes will help gigantic firms the Fed considers ‘systemically important’ to the global financial system, such as Citigroup Inc. and Goldman Sachs Group Inc.”
— Markets welcome revised NAFTA deal. WSJ's Christopher Whittall and Akane Otani: “U.S. stocks rose on the first day of the fourth quarter after the U.S. and Canada reached a last-minute deal late Sunday to revise the North American Free Trade Agreement. … The fact that the U.S. was able to forge agreements with other large trading partners in recent months—including the European Union, Mexico and now Canada—has helped alleviate investors’ fears about global trade. ‘It takes away some of the uncertainty. This gives some sign that [Trump] is at some point willing to agree to some new trade deals,’ said Jeroen Blokland, a multiasset portfolio manager at Dutch asset manager Robeco. … Relief over Nafta helped lift shares of automobile makers and industrial conglomerates, which analysts have said look particularly vulnerable to a global trade conflict.”
— Trump to focus on China dispute. Bloomberg News's Rich Miller, Andrew Mayeda and Jenny Leonard: “Trump looks to be preparing for a potentially protracted economic war with China by clearing the decks of disputes with America’s other trading competitors. In just the last few weeks, he’s struck a last-minute deal with Canada and Mexico, signed a trade agreement with South Korea and convinced Japan to begin bilateral economic negotiations. The North American accord also includes provisions seemingly aimed at keeping Chinese products out of the region. ‘Several months ago the U.S. had a multi-pronged attack on its trading partners,’ said Dec Mullarkey, managing director for Sun Life Investment Management which oversees $47 billion in assets. ‘Now the U.S. can zero in on China.’”
Claims vindication for approach. Taking a victory lap in a Rose Garden press conference Monday, Trump said he would apply his hardball tactics “with the European Union, China, Japan and potentially Brazil and India, convinced that foreign leaders take the United States seriously only if the White House threatens to upend economic ties,” The Washington Post's Damian Paletta and Erica Werner write.
But says it's “too early” for China talks. CNN's Donna Borak and Kevin Liptak: “Trump said it was 'too early to talk' with his counterparts in Beijing on trade. He did not specify what it might take to kick-start a conversation. 'China wants to talk very badly,' Trump said... 'And I said, frankly, it's too early to talk. Can't talk now because they're not ready. Because they have been ripping us for so many years, it doesn't happen that quickly.'”
— Analysts downplay NAFTA win. The Post's David Lynch and Heather Long: "Trump casts his new North American trade agreement as 'the biggest trade deal in the United States’ history' — one that would return lost manufacturing jobs to American shores, discourage future outsourcing of factory work, and 'send cash and jobs pouring into the United States.'
"But many economists and trade experts say the president’s forecast may prove overly optimistic, given the limited changes that are envisioned and the powerful economic forces that already have reshaped regional commerce. While some industries and regions would fare better than others, the sheer size of the $20 trillion U.S. economy will probably swamp those specific effects... 'This isn’t a revolutionary deal. It’s a modification of a deal already in place,' said Eric Winograd, senior U.S. economist at AllianceBernstein, an investment and research firm. 'The total economic impact will be very small. I do not expect it to boost the U.S. economy.'"
- “White House agrees to expand Kavanaugh probe slightly as McConnell signals vote is imminent.” The Post’s Devlin Barrett, Josh Dawsey, Seung Min Kim and Matt Zapotosky.
- “‘Little lies point to bigger lies’: How James Comey thinks the FBI could investigate Kavanaugh.” The Post's Amy B Wang.
- “White House tells F.B.I. to interview anyone necessary for Kavanaugh inquiry.” The New York Times's Peter Baker and Michael S. Schmidt.
- “Comey offers to testify in public about GOP's FBI bias claims.” Politico's Kyle Cheney.
— GE names first outsider CEO. The Post's Tom Heath and Jena McGregor: "Decades of stagnation at the company have taken a toll — a decline that culminated Monday in the surprise ouster of the company’s chief executive, John Flannery, after only a year on the job, and its announcement that it will take a write-down on its massive power business, effectively absorbing a $23 billion loss in the process... The company was plagued by strategic missteps, including poorly timed investments. It expanded into the power and oil industries at market peaks, paying top dollar for what turned out to be mediocre investments. It sold off portions of its financial portfolio, GE Capital, at near market lows. 'The market didn’t even give the company the benefit of the doubt that things would work,' said Ivan Feinseth, chief investment officer at Tigress Financial Partners. 'Flannery’s plan hasn’t worked.'"
— Amazon to lift minimum wage to $15. The Post: "Amazon announced Tuesday it would raise its minimum wage to $15 an hour for all its employees, a move that comes after the company faced harsh criticism for paying its workers too little. The pay hike will affect 250,000 Amazon employees and 100,000 seasonal employees who are hired at Amazon sites during the holiday season. It will affect both full-time and part-time workers and take effect Nov. 1. (Amazon CEO Jeff Bezos also owns The Post.)
— Tesla shares surge. The Post's Hamza Shaban and Drew Harwell: “Tesla shares soared by more than 16 percent in afternoon trading Monday after chief executive Elon Musk settled a federal lawsuit over the weekend that could have resulted in his ouster from the company and thrown the all-electric carmaker into chaos . . . ‘The bulls on Tesla will highlight that this is a great outcome for Tesla, which relative to the worst case scenario of Elon Musk being removed as an executive at the company it is,’ Jeffrey Osborne, an analyst with Cowen & Co., said in a note to investors Sunday. ‘However, we continue to have concerns around the company’s progress moving forward, notably cash burn, competition and the ability to drive down costs to effectively sell a $35K vehicle.’ Although the settlement with the SEC ends a potentially disastrous legal confrontation, Tesla still faces a Justice Department investigation and several shareholder lawsuits.”
— Wells Fargo executive to leave. WSJ's Emily Glazer: “One of Wells Fargo & Co.’s top retail bank executives is leaving the bank. Lisa Stevens, who leads the retail bank’s Western region, will exit Wells Fargo in late October, spokeswoman Jennifer Langan said. . . . Ms. Stevens was a top lieutenant to Carrie Tolstedt, who led Wells Fargo’s scandal-plagued retail bank for many years. At one point, Ms. Stevens ran retail banking for about a third of the U.S. and small business banking for Wells Fargo.”
— Senate Banking Committee hears from regulators. The panel is convening top banking regulators this morning for an update on implementation of the Dodd-Frank rollback that passed earlier this year. "The biggest issue is how the Fed in particular will regulate firms with assets from $100bn to $250bn. Under the law signed by [Trump] in May, those banks get out of heightened Fed supervision -- sort of -- in November 2019. They still will be subjected to periodic stress tests, and the Fed has flexibility to impose some enhanced prudential standards on those banks if it believes they’re necessary," Cap Alpha's Ian Katz wrote in a Monday note. The Center for American Progress is asking the committee to reapply those standards, in a letter that can be found here. (Fed regulatory czar Randy Quarles's testimony is here.)
— Companies curb political spending. WSJ's Theo Francis: "The biggest publicly traded companies are increasingly limiting their spending on elections and other political activity, a new report has found... Among the 414 companies that have remained in the S&P 500 since 2015, increasing numbers are either prohibiting or fully disclosing direct contributions to candidates, and contributions for election-related use to trade associations, so-called 527 groups and other nonprofits. About 36% of the S&P 500, or 176 companies, have said they won’t engage in at least one form of spending on political activity, up from 32% a year ago and a quarter in 2015, the report found."
- Senate Banking Committee hearing on the “implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act.”
- The American Enterprise Institute hosts a conversation with Jamie Dimon, chief executive of JPMorgan Chase.
- Senate Small Business and Entrepreneurship Committee hearing on “expanding opportunities for small businesses through the tax code” tomorrow.
- Senate Banking Committee hearing on fighting money laundering on Thursday.
From The Post's Ann Telnaes: “Kavanaugh isn’t over until McConnell says so.”
U.S. Army medic receives Medal of Honor for Afghanistan heroism:
“Jeopardy!” host Alex Trebek tests moderating skills at Pennsylvania gubernatorial debate:
Rains from Tropical Storm Rosa begin to soak the Southwestern U.S. and Mexico: