‘I’m not optimistic’: Political will evaporating in U.S. for passage of new NAFTA

Unions are turning on it, Democrats are demanding to change it and Foreign Minister Chrystia Freeland is casting doubt over whether Canada will support it with the steel and aluminum tariffs in place.

Now the North American free trade pact, already laden with challenges to ratification, will have to find a route to passage amid hardening political positions in the wake of Special Counsel Robert Mueller’s report, and a host of counter-investigations expected to “poison the well” for Democrats whose cooperation is crucial, analysts say.

“This was already going to be tricky but I think the political will as a practical matter is rapidly evaporating,” said Todd Tucker, a fellow at the New

WASHINGTON, DC – OCTOBER 01: U.S. President Donald Trump speaks during a press conference to discuss a revised U.S. trade agreement with Mexico and Canada in the Rose Garden of the White House on October 1, 2018 in Washington, DC. U.S. and Canadian officials announced late Sunday night that a new deal, named the “U.S.-Mexico-Canada Agreement,” or USMCA, had been reached to replace the 24-year-old North American Free Trade Agreement. (Photo by Chip Somodevilla/Getty Images)

York based Roosevelt Institute. “If there was a 45 per cent chance of a path forward for this deal a few months ago, it’s closed down to 25 to 30 per cent now. It’s getting very hard to see how the stars will align.”

U.S. Attorney General William Barr on Sunday released a four-page summary of the findings from Special Counsel Robert Mueller’s investigation into Russian interference in the 2016 election. Cleared of conspiring with Russia, U.S. President Donald Trump lashed out at the inquiry, vowing investigations into his unnamed political enemies.

For his part, Senator Lindsey Graham, the Republican Senate Judiciary Committee chairman and a Trump ally, said he would ask Barr to appoint a special counsel to investigate the origins of the Russia probe. On the other side of the aisle, Democrats – already conducting multiple congressional investigations into Trump’s business and personal dealings – demanded a full release of the Mueller report, setting up a potential clash with the White House.

It all points to an increasingly acrimonious political atmosphere where convincing Democrats to support a deal Trump views as his greatest victory on trade is getting much more difficult.

“If there’s any chance for it to go through, and I think those chances are receding, the more the Mueller investigation and counter investigations take root, the less likely you’ll get Democrats to switch sides,” said international trade lawyer Mark Warner. “We need to see what happens, but it could paralyze everything.”

The challenges facing the deal are already significant. A concerted push from U.S. Trade Representative Robert Lighthizer and various business groups to win support for the agreement has faced stiff resistance from trade unions and Democrats who have called for changes to provisions on labour standards and drug patents.

The AFL-CIO, the U.S.’s largest federation of unions has said it won’t support the pact in its current form and the United Steelworkers union has said it should not be ratified until tariffs on Canadian steel and aluminum are dropped.

“All the NAFTA renegotiation efforts in the world will not create U.S. jobs, raise U.S. wages or reduce the U.S. trade deficit if the new rules do not include clear, strong and effective labor rules that require Mexico to abandon its low wage policy,” Celeste Drake of the AFL-CIO said at a House Ways and Means subcommittee hearing Tuesday.

Canada and Mexico are important but at the end of the day this is a domestic issue now

    

Foreign Affairs Minister Chrystia Freeland added her own pressure to the process a day earlier, warning that Canadians would be “very troubled’ by any move to ratify the deal with the US  tariffs on Canadian steel and aluminum in place.

North America Free Trade Agreement

Trump Trudeau NAFTA

“The existence of these tariffs for many Canadians raises some serious questions about NAFTA ratification,” she told reporters following a meeting with Lighthizer.

Removing the tariffs — issued under Section 232 of the Trade Expansion Act of 1962 — would go some distance to easing the path to ratification, analysts said. The levies are unpopular with both political parties in the U.S. and Republican Senators Pat Toomey of Pennsylvania and Rob Portman of Ohio have introduced competing legislation that seeks limit the President’s use of them. A congressional review of Section 232 of the Trade Expansion Act of 1962 is also underway.

“Virtually all of Congress has said they won’t consider the deal as long as the tariffs are there,” said Dan Uzcjo, an Ohio-based trade lawyer with Dickinson Wright who has been keeping track of votes on the deal. “To me that’s far more important than Canada saying they won’t ratify it with the tariffs on. Canada and Mexico are important but at the end of the day this is a domestic issue now.”

Any removal of the tariffs — which could be the final sweetener to win support from some lawmakers — will have to be “carefully choreographed,” he added. The U.S. International Trade Commission is expected to unveil its report on the economic impacts of the deal in mid-April. Lighthizer will likely  submit legislation to implement the pact soon after that. A calculation on when to lift the levies would likely depend on Congress’s response, Uzcjo said.

“It’s a dilemma because you can’t start the process unless you lift the tariffs,” Uzcjo said. “However if you lift the tariffs you pull momentum away from USMCA. But at the end of the day I think the tariffs are coming off. It’s a matter of when.”

Warner is less sure, given Trump’s penchant for the levies and the support they have received from steel firms. The U.S. President is also likely to be emboldened in his tariff policy by a Court of International Trade decision Monday that ruled his imposition of tariffs based on national security was constitutional, Warner said.

“There’s one guy at the top who calls himself “Tariff man” said Warner. “I personally don’t think he’ll lift them. That’s pushing on a closed door.”

North America Free Trade Agreement

North America Free Trade Agreement

As the hurdles add up, the window for getting the deal passed is narrowing. Legislation will need to be submitted by May in order to have a deal passed by Congress’ August recess. In the meantime, House Speaker Nancy Pelosi could take all kinds of steps to delay the process, Uzcjo said. If the deal isn’t passed by Labour Day, it will likely be pushed into 2020, a U.S. presidential election year, where it will be left on the back burner.

“I’m not optimistic anyway but if this pushes into an election year with 20 odd Democrats running it’s not getting done, because they won’t want to support Trump on anything,” Uzcjo said. “That’s why this spring window is so important.”

Published at Wed, 27 Mar 2019 00:56:59 +0000