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US-Mexico-Canada trade pact: A necessity in fragile global economy

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Timely ratification of the U.S.-Mexico-Canada Agreement (USMCA) must be a priority for the recently reconvened 116th Congress. Quick adoption of the USMCA by U.S. and Canadian legislators is desperately needed to restore faith in global economic institutions at a time when rumblings of trade wars and impending recessions dominate headlines. 

Legislators from across the political divide recognize that the North American Free Trade Agreement (NAFTA), which took effect on Jan. 1, 1994, needs an update. Most notably, NAFTA is ill-equipped to address modern trends in trade brought on by substantial technological advancements. However, lingering concerns that USMCA does not sufficiently restructure NAFTA — particularly in terms of labor, environmental and intellectual property protections — have delayed the submission of a finalized agreement to Congress for its approval.  

As frustration from legislators, trade organizations and businesses carried on throughout the congressional recess, headlines routinely framed the need for an urgent ratification of USMCA in an industry-specific or a regional context. In fact, recent dialogues about the need to expedite the approval of this trilateral agreement, which was ratified by Mexico on June 19, 2019, have focused on the benefits the trade deal would bring various U.S. industrial sectors. The advantages of USMCA ratification go far beyond punctual benefits in U.S. industries, however. 

Representatives from the automotive, agriculture, dairy and trucking sectors have conveyed  emphatically that delaying ratification of USMCA prolongs economic uncertainty and prevents workers from realizing the benefits of a modern trade environment. For example, food and agricultural associations that saw U.S. agricultural exports to Mexico and Canada increased by $30 billion over the 25-year period following NAFTA’s ratification are eager to reap additional benefits from a revitalized deal. Additionally, prior to the Senate hearing on July 30, 2019, a coalition of more than 600 organizations sent a letter urging Congress to approve USMCA as soon as possible

Rachel Michelin, president and CEO of the California Retailers Association, noted in an op-ed that USMCA’s ability to balance the preservation of successful NAFTA elements, while establishing new rules on digital commerce and cross-border data sharing, is crucial for American small and medium enterprises (SMEs) searching for a foothold in globally competitive markets. The USMCA is the first U.S. free-trade agreement with chapters dedicated to digital trade, anti-corruption and upgraded regulatory practices. 

Perhaps most importantly, the USMCA includes provisions that guarantee free international data transfers. Today, industries heavily rely on data for producing, supplying and, in some cases, shipping their products and services. The new USMCA provisions helps companies keep their costs down — measures that are particularly important for SMEs. 

Yet, despite a growing number of statements from industry representatives, political spokesmen  and an announcement on Aug. 30 from AFL-CIO President Richard Trumka on his historic meeting with Mexican President Andres Manuel Lopez Obrador, USMCA textual negotiations and concerns about enforceability drag on. Sector-specific calls to update NAFTA and demands to curb partisan political maneuvering continue to pile up with little to no effect on ratification proceedings. 

As the 2020 race for the White House gets set to pick up in the coming weeks, passage of USMCA is at risk of stalling until after the elections, or disintegrating altogether. Now more than ever, we need to reframe conversations surrounding the need for an urgent ratification of USMCA in a globalist context.

The global economic system is desperate for some good news. Most headlines warn of the collapse of the international economic system and highlight increased protectionism around the world. Ratification of the USMCA will demonstrate the commitment of global trade leaders to weathering this period of economic uncertainty. Beyond a victory for President Trump, timely ratification of USMCA by our Congress will show the international community that, amidst a backdrop of increasing protectionist measures, trade is still a viable and beneficial option. 

Now is the time to reframe the urgency of USMCA passage from a matter of regional importance to a matter of international importance. 

Maria Fernanda Perez Arguello is an associate director with the Adrienne Arsht Latin America Center at the Atlantic Council. Follow her on Twitter @mfperezcr

Bryan Wilensky, a former intern with the Latin America Center now studying international affairs at Washington University in St. Louis, contributed to this article.

Tags Donald Trump International trade North American Free Trade Agreement United States–Mexico–Canada Agreement

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