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How fast is a fast track trade deal?

A three-year relay for Mexico and Canada trade

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How fast is a fast track trade deal? Growing up in rural North Carolina, I listened to textile leaders swear against the evils of jobs being exported to Mexico, blaming the North American Free Trade Agreement or “NAFTA” for this exodus.

Twenty-five years since the passage of NAFTA, the clock has begun ticking on a new trade deal with Mexico and Canada (USMCA) with President Trump’s submission of the draft Statement of Administrative Action to Congress. USMCA was ratified by Mexico’s Senate on June 18, and the Canadian Parliament is waiting for the U.S. Congress to move first.

Can Trump deliver on his campaign promise to improve NAFTA, “the worst trade deal ever” and continue to “Make America Great Again”? Only time will tell and there are many political and procedural hurdles to cross.

What is “Fast Track” Authority? Last November, the leaders of U.S., Mexico and Canada signed the USMCA deal to replace NAFTA which the Administration promises will provide more balanced and reciprocal trade, higher-paying jobs for U.S. workers and economic growth for all three countries.

The Trump administration wants USMCA to be considered under the Trade Promotion Authority (TPA), also called “fast track authority.” “Fast track” allows the U.S. Trade Representative (USTR) to negotiate a trade deal with other countries and for it to be approved by Congress in an up or down vote (no amendments or changes to the underlying legislation) under an expedited approval process. Once the “fast track” process begins, a strict timetable is triggered.

Why should businesses care? U.S. businesses seek certainty with long-standing trading partners, Mexico and Canada, and they want a deal that is better than NAFTA.

Trade with Canada and Mexico supports 12 million American jobs, including more than 2 million jobs at more than 43,000 manufacturing firms across the U.S. Agricultural exports to Canada and Mexico rose to $39 billion according to the American Farm Bureau Federation, and these two countries represent top markets for U.S. grains, dairy products, meats, fresh fruits and vegetables.

The export of U.S. services to Mexico and Canada reached $91 billion in 2017, with the fields of audiovisual, software, architecture, accounting, engineering and project management, banking, insurance and other areas continuing to have export growth.

According to the USMCA Coalition, which includes such business alliances as the Business Roundtable, the U.S. Chamber and the National Association of Manufacturers, the deal “modernizes the rules of trade in North America with state of the art provisions” in market access, digital trade, intellectual property, agriculture, and financial services, among others.

How fast is “fast track”? Lap 1: USTR negotiations with Congressional Democrats USTR Ambassador Robert Lighthizer began negotiating with Congressional Democrats in earnest with the U.S. International Trade Commission’s submission of its required economic analysis on April 15. Lighthizer garnered House Speaker Nancy Pelosi’s trust and she formed House task forces to address Democrats’ remaining concerns.

Lap 2: Draft USMCA SAA sent to Congress President Trump caught many by surprise on May 30, clicking his procedural stopwatch by sending his draft Statement of Administrative Action (SAA) to Congress. This unexpected move started the minimum 30-calendar day window which must pass before the Administration’s implementing legislation can be sent to Congress.

The first date after the 30-calendar day window is Sunday, June 30th, followed by Congress’ July 4th recess. Therefore, the earliest the Administration can send the legislation is Tuesday, July 9th, but there is no time limit on when the legal text must be sent, so it could be much later.

Democrats have urged the White House to hold off on sending implementing legislation until their concerns have been met. House Ways & Means Chairman Neal quickly sought to sooth frustrated Democrats stating the “timeline for the consideration of a renegotiated NAFTA will be determined by the completion of the work that remains to be done by Democrats and Ambassador Lighthizer” to address the needed improvements, not by the premature submission of a draft SAA.

Lap 3: U.S. House of Representatives When President Trump delivers the full USMCA implementing legislation to Congress (which triggers the “fast track” time clock), the USMCA baton passes to House Speaker Pelosi. “Fast track” gives the House Ways & Means Committee, with jurisdiction over trade and revenue matters, a maximum of 45 legislative days to send the bill to the House floor for a vote.

The House has a maximum of 15 legislative days to vote on the legislation. Given the House legislative calendar, Speaker Pelosi can act immediately, or can wait until next year, to bring the bill to the House floor for a vote.

While Republicans have said only 30-40 Democrats are needed to secure 218 votes, Pelosi won’t bring USMCA to the floor without significant Democratic support. Democratic working task forces must get 80+ Democrat votes before Pelosi will give a “thumbs up” to proceed.

Lap 4: U.S. Senate The U.S. Senate is unlikely to act until the House passes USMCA. The Senate Finance Committee has up to 45 legislative days to vote on USMCA, which includes some flexibility.

Senate Finance can start the 45-day clock when the full implementing legislation is sent to Congress, or they can declare the clock starts after the House votes, which could be take place well into next year.

After Senate Finance acts, Majority Leader Mitch McConnell has up to 15 legislative days for a vote on the Senate Floor.

Race over: President Trump signs USMCA into law

Once the legislation has passed both the House and the Senate, President Trump can sign the bill into law.

What are the primary political hurdles? The Administration removed a major hurdle on May 20, by lifting the aluminum and steel tariffs imposed on Canada and Mexico, satisfying congressional Republicans who called for their removal in exchange for their support of the USMCA deal.

Ten days later, in a shocking setback to the USMCA momentum, President Trump tweeted out threats of escalating across-the-board tariffs on Mexican goods if that country’s leadership didn’t put stronger enforcement procedures in place to stem the tide of illegal immigrants’ crossing over the U.S. southern border. Those tweets brought the race for USMCA to a dead halt. Fortunately, President Trump and Mexico reached a late breaking deal on June 7, removing escalating tariff threats.

Hurdle #1: Resolution of House Democrats’ concerns In April, the Mexican Senate passed law labor revisions, giving workers the right to vote on unions and their labor contracts through a secret ballot, steps necessary for the implementation of USMCA, and a prerequisite for House Speaker Pelosi’s consideration of USMCA.

House Democrats recently appointed task force teams to resolve the remaining issues on labor, environment, biometrics and enforcement. Pelosi has paired tandem teams of a Ways & Means member with an expert Member off committee to find solutions and 80+ Democratic votes that could lead to a path forward with pro-trade Republicans in favor of the USMCA legislation.

Hurdle #2: President Trump repeals NAFTA President Trump has threatened to repeal the current NAFTA agreement to put pressure on House Democrats to act on USMCA. Moderate House Democrats, who must carry the water on USMCA, have made it clear to USTR Lighthizer that repeal of NAFTA would be a “deal breaker.”

Hurdle #3: Anti-trade rhetoric builds with 2020 Democratic debates Though no hard deadline exists until President Trump sends implementing legislation, the deal will likely have to be voted upon before the August recess to have the greatest chance for success. After Labor Day, members are largely focused on reelection, not passing legislation. Moderate House Democrats may want a “pro-business” vote going into elections, but with nine Senators running for president, the anti-trade rhetoric only builds after the first Democratic debates.

How fast and what to watch? President Trump starts the time clock by sending implementing legislation to Congress, but House Speaker Pelosi controls when and if USMCA moves to the House floor by giving Ways & Means Chairman Neal the green light to advance the legislation.

How quickly will House Democrat task forces find solutions to garner 80+ Democratic votes? What additional hurdles could arise in the process? Can Republicans agree to the House Democrats’ labor and environmental demands?

Technically, with “fast track,” USMCA legislation could be introduced and signed into law before the August recess. Alternatively, debate could be postponed for a future Congress like the Colombia Free Trade Agreement. Only time, and securing the necessary votes will tell.

Lace up your track shoes. On your mark, get set, go!

Contact:

Mary Moore HamrickMary Moore Hamrick
National Managing Principal, Public Policy
T +1 202 521 1545