President Trump signed the U.S.-Mexico-Canada Agreement on trade Wednesday, overriding the 1993 North American Free Trade Agreement and fulfilling one of his 2016 campaign promises.
“Today, we finally end the NAFTA nightmare,” Trump said at a White House signing event while surrounded by hard-hat wearing supporters. The president argued USMCA would give workers a fairer deal by making companies invest more in the United States rather than outsourcing. “This is something we really put our hearts into. It is probably the main reason why I chose to live this crazy life.”
The deal keeps most of NAFTA intact but adds provisions aimed at ending outsourcing of manufacturing jobs to Mexico, limiting the use of supply chains abroad, and opening up Canada to more U.S. farm goods, such as dairy products. The deal is a big win for the technology industry, which got protections for digital trade, prohibitions on forced data localization, and enhanced copyright provisions.
The deal had a rocky road to Wednesday’s signing. While the underlying deal was signed by the three countries in late 2018, it spent most of the next year stuck in Congress. House Democrats and their union allies argued that USMCA lacked significant enforcement provisions. House Speaker Nancy Pelosi engaged in extensive negotiations with the White House to amend the deal. U.S. Trade Representative Robert Lighthizer negotiated on behalf of the administration, and a deal was finally reached in December. The Senate passed USMCA earlier this month with strong bipartisan support.
Democrats claimed the torturous negotiations vastly improved USMCA by strengthening its labor provisions. “We rescued the flawed NAFTA 2.0 that didn’t have the votes to pass the House,” Rep. Earl Blumenauer, an Oregon Democrat, told reporters. Democrats nevertheless criticized the deal for not including additional language addressing climate change. The White House did not invite any Democratic leaders to the signing.
Lighthizer noted that NAFTA had been controversial at the time of its passage, and USMCA was meant to “change the stale consensus on trade” by creating a bipartisan policy.
The deal requires that 75% of an automobile’s parts be made in North America to be duty-free, up from 62.5%, and that at least 40% be built by people making at least $16 an hour. The provisions are intended to make outsourcing to Mexico less attractive. The provisions will cost the industry $3 billion in additional tariffs over the next decade, the Congressional Budget Office has estimated.
The projected economic benefits of the deal are marginal. A study by the International Trade Commission, a federal agency, found it would raise U.S. gross domestic product by $68 billion, about 0.35%, and add 176,000 jobs nationwide, an increase of 0.12% in employment. For many businesses, simply ensuring that the underlying free trade provisions of NAFTA remain intact, despite Trump’s earlier threat to pull the U.S. out of the deal, was a key goal.
“The USMCA will finally provide manufacturers the certainty they need to keep reaching for new heights and secure the millions of American jobs that depend on North American trade,” said National Association of Manufacturers President Jay Timmons.
