USMCA: A Major Victory for Democrats, but Still Just a Consolation Prize



 The House easily passed the US-Canada-Mexico trade agreement, USMCA for short, last week with just 41 votes against it. The Senate is expected to approve it early in the new year with an equally lopsided vote.

But the deal moving through Congress is not the same one Donald Trump submitted. The passage of the USMCA marks the first time in history that Congress has significantly altered a trade deal, and in essence, renegotiated it before it goes into effect. Democratic negotiators, as Speaker Pelosi said, ate the Trump administration’s lunch, and Trump’s US Trade Representative admitted as much.

Democratic negotiators won provisions making labor and environmental provisions enforceable, strengthening worker protections, and making it easier for member countries to legislate on prescription drug pricing. I wholeheartedly agree with the Speaker that the deal that passed the House is significantly better than NAFTA, and ‘infinitely’ better than the original agreement the Trump administration sent over.

But let’s not lose sight of the fact that the USMCA is, at best, a consolation prize against the backdrop of a much broader, more encompassing deal that would have been far more advantageous to the United States and workers’ rights: the Transpacific Partnership (TPP). The TPP, a trade agreement negotiated by President Obama, was abandoned by Trump after leftist opposition to it in 2016 helped sink it. The eleven non-US countries retained the pact with some modifications, in a new agreement known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. It is also referred to as the TPP-11.

The language of the USMCA and TPP are very similar, and it got more similar to the original TPP before modification by TPP-11 countries. after Democrats got done rolling the Trump administration. TPP-11 and USMCA share up to 78% of the language on how governments have to treat businesses from trading partners (the crux of any trade agreement). TPP-11 and USMCA also share 60% of the language on state-owned enterprises (both ban the government giving special treatments to state-owned companies over private ones).

There are at least two areas where even the improved USMCA is a worse deal than the original TPP: digital rights and labor rights.

Data Rights: The ability of governments to protect their citizens’ data is significantly weakened in the USMCA compared to the TPP-11. The USMCA (in contrast with the TPP-11) bans governments from requiring physical presence of data companies in their territories in order to do business in that country. This means that the only way for a government to hold a foreign technology company accountable for harming its citizens is to file a case against the government of the host country of the tech company to an international/intergovernmental dispute settlement panel.

Labor Provisions: Although the USMCA technically expands labor rights against TPP-11, broadly speaking it merely parallels the original Transpacific Partnership presented by the Obama administration. Post US-withdrawal, worker provisions was one of the few parts that were weakened before TPP became TPP-11. Both the original TPP and the modified USMCA explicitly protect the right of workers to organize, collectively bargain, and have the basic dignity of work protected under the standards of the International Labour Organization. The USMCA contains certain provisions specific to north America, most notably the requirement that 40% of a car is manufactured by workers making at least $16 an hour in order to escape tariffs from other USMCA countries.

Nevertheless, organized labor is losing a major tool of enforcement under the USMCA compared with the original TPP: a dispute settlement process that would allow labor unions from one country to bring cases in front of a neutral, international panel against the government of another country for violating labor rights or labor provisions of the agreement.

The Investor-State Dispute Settlement (ISDS) process, a common feature of many trade agreements, would allow investors from one country to bring cases against the government of another for violations of the agreement. With the original version of the TPP negotiated by President Obama, the same provisions would apply to labor unions, meaning that, for example, the United Auto Workers could bring a case before an independent panel if Canada, Mexico, Peru or another country attempted to get around labor standards.

Even though the ISDS process caused a great deal of consternation and handwringing among the left about ‘sovereignty,’ we should note that the United States has never lost an ISDS case, under NAFTA or any other trade agreement. In fact, in the USMCA, the party pushing to remove the ISDS process was Canada, a country that has a mixed record in defending ISDS cases against US entities. Compared to the TPP, American companies and labor unions have lost a significant - and thus far effective - tool to hold Canada accountable to the terms of the trade pact. The only way under the USMCA to hold Canada accountable remains an international dispute resolution process, however. But under the USMCA, a case against Canada in front of such a panel would have to be brought by the government of the United States (or Mexico).

Canada also succeeded in largely removing the ISDS provision from TPP-11 after the Trump withdrew the US from the TPP. Now that it is gone from the USMCA as well, Canada appears to have been the victor of this process.

Compared to the Transpacific Partnership agreement negotiated by the Obama administration, the USMCA is a an agreement weaker in both depth and broadness. The TPP would have encompassed not just 40% of the global economy but a mix of developed and developing economies spanning three continents of critical importance that would have cemented global standards for business, labor, and climate. Arguably, the loss of this broad focus of American leadership is the most significant harm caused by the US withdrawal.

So although the USMCA is a major victory for progressives, it remains a small one compared to the original TPP, and much more work remains to be done to return the United States to a place of global leadership on free trade.