Washington, D.C. — Next week, President Donald Trump will deliver his State of the Union address, and he will likely call on Congress to consider and pass a renegotiated North American Free Trade Agreement (NAFTA), known as the U.S.-Mexico-Canada Agreement (USMCA). CAP analysis of the trade plan finds that the agreement fails to put working families at the center of its priorities or put competition on a more level playing field for all economic actors. CAP’s report also offers range of suggestions for how to create a progressive, high-standards trade agreement that approaches globalization more equitably.
“Free trade can provide for greater competition and choice in the United States and poverty reduction in developing countries, but as the case study of NAFTA has shown, it can have significant negative effects for American workers. Just because Trump said he would “rip up” all of our existing trade agreements does not necessarily mean that the new ones are any better,” said Marc Jarsulic, senior vice president for Economic Policy at CAP and a co-author of the report. “A closer look at the renegotiated NAFTA shows that workers will scarcely fare better under this agreement.”
“There is real anger and frustration felt by working families hit hard by the economic shocks from globalization and Wall Street-driven economic priorities. Trump has pledged to help these so-called forgotten men and women, yet once again the president has delivered largely for increasingly concentrated business interests—rather than workers, the environment, or the middle class,” said Andy Green, managing director for Economic Policy at CAP and a co-author of the report. “It’s time to put workers and their ability to be part of a competitive, climate-smart, middle-class democracy at the center of America’s international economic policy.”
CAP’s analysis of the USMCA finds that the agreement fails to deliver the strong labor and environment standards and enforcement that workers need, and the complete omission of climate change as a priority to be addressed in trade is a significant failure. Moreover, the USMCA includes expanded monopoly protections for pharmaceutical companies that would help keep U.S. drug prices high, and it also exports these policies to Mexico and Canada. Large swaths of text—covering areas such as antitrust, regulatory coherence, and more—contain a strong deregulatory thrust that can chill needed changes in domestic policy. While the USMCA significantly limits NAFTA’s investor-state dispute settlement (ISDS) mechanism—which gives foreign corporations the special right to challenge government actions in private forums instead of domestic courts—for most sectors, it nonetheless retains it for the oil and gas firms with governmental contracts in Mexico.
CAP’s report outlines what provisions should be included in a high-road, renegotiated NAFTA. It must:
- Raise labor standards in North America. The United States, Canada, and Mexico should have agreed to maintain in law and enforce in practice the essential labor rights provided in the eight International Labour Organization core conventions. These conventions include the protection of the right to organize and bargain collectively, abolition of forced labor and child labor, and elimination of employment discrimination, among other principles. Workers should have the right to organize and bargain across those same borders, and the agreement should also have a mechanism for determining a country-specific minimum wage that would guarantee workers are paid at least a living wage.
- Raise environmental and sustainability standards in North America. No trade agreement should fail to incorporate new, high-road approaches to environmental standards that recognize the costs of pollution and climate change, and trade agreements should also be structured to enable and incentivize countries to raise their environmental standards.
- Enforce labor and environmental standards. Not only is it important to have stronger labor and environmental standards, but any renegotiated agreement should have effective enforcement mechanisms, ensuring that all countries meet these standards. While the USMCA proposes to enforce labor and environmental standards through the general dispute settlement procedures, that is likely to be inadequate.
- Exclude the ability to use investor-state dispute settlement (ISDS.) While the USMCA restricts ISDS principally to expropriation and discrimination, with requirements to exhaust domestic remedies, it retains certain special rights principally for the oil and gas sectors that have contracts in Mexico with the government. This provision should be removed.
- Limit the inclusion of standards that overly benefit business and constrain democratic action. Rules governing intellectual property protections, a chapter on “good regulatory practices,” and problematic language on antitrust raise concern around negative impacts on public interest-oriented policymaking both in America and abroad.
Click here to read “Trump’s Trade Deal and the Road Not Taken: How to Evaluate the Renegotiated NAFTA” by Marc Jarsulic, Andy Green, and Daniella Zessoules.
For more information or to speak with an expert, contact Allison Preiss at gro.ssergorpnacirema@ssierpa or 202.478.6331.