In these pages on Feb. 2, 2018, I outlined the importance of the Trump administration's successfully updating the 1994 North American Free Trade Agreement (NAFTA) and enhancing the benefits to Arkansans in the form of expanded export sales and growth in jobs.
Just over a year later, President Trump's U.S. Trade Representative, Robert Lighthizer, has submitted to Congress the draft of the new United States-Mexico-Canada Agreement (USMCA), which all three countries have initialed. The agreement has 34 chapters as well as various "side agreements."
Now under review by Congress, the House Ways and Means Committee, in consultation with the Trump administration, will develop implementing legislation and submit that to the House and Senate for approval. House Speaker Nancy Pelosi says she wants Mexico to act on its labor commitments before she supports moving the agreement in the House. Recently, the House and Senate of the Mexican Congress passed new labor laws which, when signed into law, clear a significant hurdle to ratification.
As a general matter, the USMCA draft has successfully updated and modernized NAFTA and made substantial improvements regarding several points I outlined in my column last year. These include a 21st-century approach to digital trade, intellectual property rights, and cross-border data flows. The draft agreement also includes important changes in the agriculture chapter by increasing dairy market access, albeit modestly. A side letter on energy maintains the tariff schedules of all three countries, keeping tariffs at zero for raw and refined oil and gas products. North American energy consumers are greatly benefited by this continued effective language.
President Trump accomplished one of his principal objectives in this agreement by moving the U.S. automotive manufacturing rules of origin from 62.5 percent to 75 percent for cars, light trucks and parts and from 60 percent to 70 percent for heavy trucks and parts. This was one of his goals for a more modern NAFTA--to encourage more local U.S. production within the definition of North American output.
While I congratulate the administration for modernizing NAFTA, there are aspects to the agreement that are concerning. I oppose the imposition of section 232 steel and aluminum tariffs on Canada and Mexico. These tariffs continue to be present in the draft agreement. Also, in the government procurement chapter, Canada has been excluded. This is a mistake as it disadvantages American contractors seeking to do business in Canada. Taxpayers in all three countries benefit greatly when there is more competition to provide government-contracted services.
The USMCA also proposes several committees to advise on the rules-of-origin definitions as well as a committee on competitiveness to support "a strong economic environment that incentivizes production in North America." However, these two committees are currently proposed to be comprised of only government officials. This makes no sense. Both committees should contain significant private-sector voices. Likewise, I do not support the attempt to create a confusing sunset provision at the end of six years. The agreement already contains mechanisms for member countries to seek changes in the future. In my view, that should be sufficient.
One area where the United States fought unsuccessfully for change was in the tariff-free de minimis amounts for our citizens. Today, we have a duty-free threshold in the United States of $800 per person, and we were successful in getting Mexico and Canada to increase their threshold slightly, but only up to $117. This adds unnecessary red tape and paperwork. To benefit e-commerce, the U.S. should continue to press for a side letter to increase the de minimis amounts.
Ultimately, it is my hope that these specific concerns can be improved and agreed upon in the conforming legislation and in the side agreements.
On balance, the USMCA is a successful renegotiation of the North American Free Trade Agreement. It is superior to the existing arrangement and is a far better proposal than the alternative of scrapping NAFTA and returning to World Trade Organization rules.
This agreement is good for American workers, taxpayers, businesses, and consumers and will keep the United States and our North American markets competitive for decades to come.
------------v------------
U.S. Rep. French Hill represents Arkansas' 2nd District.
Editorial on 05/09/2019