Mike Pence heads to New Mexico to hail new USMCA trade deal. How does it differ from NAFTA?
President Donald Trump and the leaders of Mexico and Canada are touting a new trade agreement they're calling USMCA that would benefit workers across North America. USA TODAY
President Donald Trump called the original North American Free Trade Agreement a "disaster." Now his vice president is traveling to New Mexico on Wednesday to sell NAFTA 2.0.
The new deal — which would regulate $1.39 trillion in trade between the U.S. and its neighbors, Mexico and Canada -- isn’t over the finish line yet: Congress must still approve it.
Vice President Mike Pence arrives in Artesia, New Mexico, Wednesday to drum up support for the U.S.-Mexico-Canada Agreement, a modernization of the 25-year-old free trade accord that brought sweeping change to the automotive and apparel industries, agriculture and labor markets in the mid-1990s. He has been selling the idea that the USMCA corrects the mistakes of the past.
The original NAFTA “put American companies and suppliers at a disadvantage,” Pence said in July at the groundbreaking of an auto parts supplier in Lancaster, Ohio.
“Those days are over,” he told the crowd. “The USMCA levels the playing field and modernizes this agreement in a way that puts American workers first.”
Mexico’s Senate approved the new agreement in July. Canada’s Parliament is expected to ratify the accord once it’s clear the U.S. Congress is prepared to approve it. But with a U.S. presidential election on the horizon and Democrats’ unresolved qualms with the agreement’s labor and environmental provisions, there are no guarantees that the deal will clear its last hurdle.
“For the business community that is looking for increased internationalization, it would be a plus,” said Terence Stewart, a Washington, D.C., trade law attorney who has represented both business and labor organizations. “For worker groups and environmental groups who believe agreements have given short shrift to working people and preserving the environment, they have a host of issues.”
The new agreement tweaks rules for auto manufacturing and includes a provision for minimum wages; it opens Canada’s dairy market slightly to U.S. producers; and it extends patent protections for pharmaceutical companies making biologics, which represent one of the highest-priced niches in drug sales. It also sets rules in sectors like e-commerce that didn’t exist when the old NAFTA was written.
Story continues below infographic
Pence and many Republicans are pushing for a vote to ratify the deal this year, arguing the USMCA will create jobs and boost the economy. Many Democrats, including U.S. House Speaker Nancy Pelosi, say the agreement doesn’t include strong mechanisms to enforce new labor and environmental protections.
Pelosi told reporters in June that the renegotiated trade pact cannot simply be “NAFTA with sugar on top.”
“You can’t get passage without both parties having the core issues of concern addressed,” Stewart said.
Texas, New Mexico have billions of dollars in trade on the line
Artesia sits in the oil and gas mecca of the Permian Basin that Texas shares with New Mexico. It’s dairy country, too, on both sides of the Texas state line. Both states potentially have a lot riding on the renegotiated NAFTA.
Texas exported $109.7 billion in goods to Mexico in 2018, representing 35 percent of the state’s total goods exports, according to the Office of the U.S. Trade Representative. Canada is the Lone Star state’s second-largest export market, absorbing $27.4 billion in goods last year.
Although New Mexico does a sliver of the business with Mexico that Texas does, the country is still New Mexico’s largest trading partner. New Mexico exported $1.4 billion in goods to Mexico in 2018 and $116 million in goods to Canada, its fourth-largest trading partner.
Speaking in Ohio last month, Pence acknowledged all the harm NAFTA did to local economies in the Rust Belt – the jobs lost to Mexico to workers paid a fraction of the wages. Pence said NAFTA “could be described as just having hollowed out historic jobs.”
He argued that the USMCA would guard against that.
Pence told people at the event that “40% of all auto parts under the USMCA must be made by workers making, essentially, what is the average hourly wage here in the United States. It will eliminate the incentive to manufacture outside the United States and it will eliminate the incentive to move jobs south of the border.”
Bob Cash, spokesman for the Texas Fair Trade Coalition, acknowledged that the terms of the agreement offer an improvement – in principle. The group bills itself as a "nonpartisan coalition of labor, environmental, community, family farm, religious and human rights organizations."
“The deal includes language that fair trade advocates have been fighting for since before NAFTA was passed,” Cash said. “The problem is, we don’t see any improvement for a mechanism for enforcing that language, particularly labor standards language.”
“Without a swift and effective enforcement mechanism,” he said, “it’s just words and wouldn’t stop the outsourcing of jobs from the United States.”
Camila Feibelman, director of the Rio Grande chapter of the Sierra Club covering West Texas and New Mexico, said that the new pact still lets companies outsource pollution, as well.
"As a sovereign nation we have the right to set high and protective standards for clean air and water and land," she said. "What the new NAFTA does is allow companies to go to places like Mexico where the environmental standards aren’t as high and then import those products back to the U.S. at no cost."
Deal offers 'mixed bag' of changes but market certainty is key
Texas and New Mexico farmers and ranchers are among the staunchest supporters of the new trade agreement. The same is true for border-based manufacturers and providers of logistics and warehousing, whose business models are based entirely on cross-border trade.
Texas agriculture businesses which exported $7.2 billion in goods last year to Mexico and Canada – have been buffeted hard by tariff threats and trade wars, particularly with China, said Gary Joiner, spokesman for the Texas Farm Bureau, which represents half a million farmers and ranchers in the state.
“I think a good way to say it is that Texas farmers and ranchers are hoping for a trade win now, soon,” Joiner said. “We are expecting better market access for beef, dairy, corn, wheat and pork.”
Dairy farmers have been struggling for years with low milk prices, said Charlie DeGroot, whose Three Amigos Dairy in Roswell, north of Artesia, milks 4,500 cows every day. Fifteen percent of all the milk generated in the U.S. is exported; for New Mexico producers, Mexico is the biggest export market, then Canada and China, he said.
“Our price is dictated by our ability to get good prices for our export market,” he said.
DeGroot, who also serves as president of the Dairy Producers of New Mexico trade group, said, “The official position of the organization is that we would prefer the new plan to NAFTA, but we prefer NAFTA to nothing.”
About three hours south of Artesia, just outside of El Paso, businesses clustered at New Mexico’s Santa Teresa port of entry are eager to see the USMCA ratified.
Jerry Pacheco, executive director of New Mexico’s Border Industrial Association, said the USMCA contains a "mixed bag" of changes for his organization’s 100 member companies that operate at Santa Teresa – some positive, some negative, depending on the industry. But the main headwind for businesses that depend on trade with Mexico has been the lingering uncertainty over whether Congress will pass the deal or not.
“When you recruit companies, when they commit to spending millions of dollars, they need to know the rules of the game to be able to roll those dice,” Pacheco said. “We’re ready for this to be put to bed.”
President Trump's 'America First' approach has relied on slapping tariffs on countries, such as China and Mexico, which have led to current trade wars. What is a tariff and how do they work? We explain. USA TODAY
Tough negotiations ahead for Congress, Trump
Once the deal is presented to Congress in the form of legislation, it's an up-or-down vote with no opportunity to modify the language of the agreement. That's why negotiations have been ongoing between Democrats and the administration, according to U.S. Sen. John Cornyn (R-Texas), who described the legislative process in remarks at the Wilson Center’s Mexico Institute in Washington, D.C., in June.
Any side agreements to modify the language of the deal must be struck before legislation hits the House floor.
"The farther this gets into the election cycle and the more this becomes politicized by the presidential campaign and other campaigns, I think that would be to the detriment of considering the USMCA and getting it passed," he said.
In a statement to the El Paso Times, Sen. Ted Cruz (R-Texas) said he "is hopeful Congress will move to consider and debate USMCA this fall."
"There are over 2.2 million jobs in Texas that depend on international trade, including Texas farmers, ranchers, small businesses and manufacturers," he said in the statement. "Trade with our USMCA partners, Mexico and Canada, accounts for over 40 percent of Texas’s total exports and imports, making a free trade agreement with our northern and southern neighbors critical to Texas’s continued economic growth."
New Mexico's Democratic Sens. Tom Udall and Martin Heinrich have both opposed Trump's periodic threats to slap tariffs on Mexican exports but have also expressed skepticism about whether trade deals, including the USMCA, go far enough to protect workers.
In El Paso, U.S. Rep. Veronica Escobar told the El Paso Times that Congress is "eager to get to 'yes' on a USMCA vote."
"To do this we must ensure the new agreement brings true prosperity and opportunity to our region and to our neighboring countries," she said "This includes addressing the current biologic data exclusivity provision that would hurt El Pasoans by raising the already sky-high costs of prescription drugs, addressing labor issues and ensuring there are true enforcement provisions."
She added, "I’m optimistic we can get there.”
Lauren Villagran covers the border and can be reached at email@example.com.