Agreement on NAFTA replacement reached by White House, Democrats

Keith Laing
The Detroit News

Washington — President Donald Trump and U.S. House Democrats have reached an agreement on a replacement for the North American Free Trade Agreement, clearing the way for a potential big political win for the president and giving automakers long-sought certainty over rules that govern production of cars in the U.S., Canada and Mexico.

Announcing the agreement just minutes after articles of impeachment against the president were released, House Speaker Nancy Pelosi, D-Calif., said of the deal on the new trade pact: "It's a victory for America's workers. It's one that we take great pride in advancing.

"This a day we've all been working to and working for, on the path to 'yes,'" Pelosi told reporters during a news conference in Washington. 

House Speaker Nancy Pelosi of Calif., accompanied by House Congress members speaks at a news conference to discuss the United States Mexico Canada Agreement (USMCA) trade agreement, Tuesday, Dec. 10, 2019, on Capitol Hill in Washington.

Few on Tuesday had seen the fine points of the trade deal, known as the United States-Mexico-Canada Agreement — or USMCA. But prior drafts of the agreement stipulate that 75% the proportion of a car's parts must originate from one of the three countries to qualify for duty-free treatment, up from 62.5% under current NAFTA rules. In addition, 40-45% of an auto's content must be made by workers earning at least $16 per hour. Vehicles not meeting the requirements would be subject to a 2.5% duty.

The labor provisions are an attempt to boost U.S. production, but it remains to be seen if carmakers that have gravitated to lower wages in Mexico will decide if they can profitably return production stateside. 

Democratic leaders gave no indication on Tuesday that the auto provisions were a part of contentious negotiations that stretched for over year. 

House Ways and Means Committee Chairman Richard Neal, D-Mass., who led Democrats in negotiations with U.S. Trade Representative Robert Lighthizer, said Tuesday the changes to the initial draft of the USMCA submitted by the Trump administration in 2018 were focused mostly on provisions involving enforcement of provisions designed to protect American workers from problems caused by low wages in Mexico and environmental protections.

Neal said Democratic negotiators "strengthened the labor standards, strengthened environmental chapters, enhanced the verification mechanisms for environmental trade.

"Our constant emphasis was on enforceability, enforceability, enforceability," Neal said.

Trump praised the agreement, even as he railed against Democrats' decision to move forward with articles of impeachment against him.

"It will be the best and most important trade deal ever made by the USA," Trump tweeted just before Pelosi's second press conference began. "Good for everybody — Farmers, Manufacturers, Energy, Unions — tremendous support. Importantly, we will finally end our Country’s worst Trade Deal, NAFTA!"

Automakers signaled support for the agreement. 

“The USMCA allows the U.S. auto industry to remain globally competitive by ensuring vehicles and auto parts are able to move freely across country lines," said Matt Blunt, president of the American Automotive Policy Council, which represents the three Detroit automakers. He said the U.S. Trade Representative estimates the agreement will lead to a $23 billion increase in U.S. annual parts sales alone. 

Although Ford Motor Co. was also waiting to review the agreement, its response was positive: “It allows the U.S. auto industry to be globally competitive, encourages U.S. research and development in this new era of mobility, and provides a framework for good-paying U.S. jobs. This benefits our customers, the workers and families who depend on an a strong Ford, and the suppliers who help fuel our success."

General Motors Co. said: "We view the agreement as vital to the success of the North American auto industry and have long supported efforts to modernize it in a way that strengthens the industry and positions it to be a global leader."

Fiat Chrysler Automobiles urged "swift passage of the USMCA, which creates clear rules and the certainty we need to support large investments." 

Representatives from the three nations met Tuesday in Mexico City sign the agreement. Mexican President Andres Manuel Lopez Obrador said he expected it would be approved by legislatures of all three countries.

The agreement will have to be signed by Mexico and Canada. Lighthizer is expected to participate in a signing ceremony in Mexico that could occur as early as Tuesday afternoon.

After the agreement is signed by all three nations, the text of the trade pact will have to be submitted to Congress for ratification. A vote in the Democratic-controlled U.S. House is expected as early as next week, but Senate Majority Leader Mitch McConnell, R-Ky., signaled Tuesday the Senate will be consumed with the trial of President Trump if Democrats go forward with impeachment, which could delay passage there until January.

Trump has touted the agreement as a major victory for U.S. manufacturers, including carmakers.  Labor leaders have raised questions about whether the new pact will include enough protections for American workers who are competing against Mexico counterparts who paid far less than U.S. laws would ever allow.

"We have a moral responsibility to help our workers," U.S. Rep. Debbie Dingell, D-Dearborn, said in a statement. "If this new deal levels the playing field, creates jobs, raises wages, brings manufacturing back to this country, and fosters innovation and technology – it will earn my vote."

U.S. Rep. Haley Stevens, D-Rochester Hills, said: “I have been pushing for a vote on USMCA by the end of the year because manufacturers in my district are looking for certainty, and that’s what this trade deal will bring along with jobs and economic growth.” 

Republicans also hailed the bipartisan agreement, chiding Pelosi for holding up progress on the trade pact for more than a year. 

"For the past year, I have consistently called on Speaker Pelosi to schedule a vote on the USMCA because it will strengthen our economy, create jobs, and provide new opportunities for families across Michigan," U.S. Rep. Bill Huizenga, R-Zeeland, said.

AFL-CIO President Richard Trumka initially threw cold water on the idea of quick passage of the USMCA before the end of the year, but ended up endorsing it.

"For the first time, there truly will be enforceable labor standards — including a process that allows for the inspections of factories and facilities that are not living up to their obligations," the union leader said.

Support was far from unanimous across the labor movement, however. 

Robert Martinez Jr., International President of the International Association of Machinists and Aerospace Workers, said any acceptable deal must address the outsourcing of jobs to Mexico.

"Unfortunately, we are not aware of provisions in the newly negotiated agreement that effectively address this matter, especially when it comes to aerospace and other manufacturing sectors," Martinez continued.

The United Auto Workers union did not immediately comment on the deal.

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Twitter: @Keith_Laing