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US Lower House overwhelmingly approves the new North America trade deal

Friday, December 20th 2019 - 09:40 UTC
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The House passed legislation to implement the US-Mexico-Canada Agreement, 385-41, with 38 Democrats, two Republicans and one independent member voting no The House passed legislation to implement the US-Mexico-Canada Agreement, 385-41, with 38 Democrats, two Republicans and one independent member voting no

The United States House of Representatives overwhelmingly approved a new North American trade deal on Thursday that includes tougher labor and automotive content rules but leaves US$1.2 trillion in annual United States-Mexico-Canada trade flows largely unchanged.

The House passed legislation to implement the US-Mexico-Canada Agreement (USMCA) 385-41, with 38 Democrats, two Republicans and one independent member voting no. The bipartisan vote contrasted sharply with Wednesday night's Democrat-only vote to impeach US President Donald Trump.

The House vote sends the measure to the Senate, but it is unclear when the Republican-controlled chamber will take it up.

Senate Republican leader Mitch McConnell has said that consideration of the measure would likely follow an impeachment trial in the Senate, expected in January.

The USMCA trade pact, first agreed upon in September 2018, will replace the 1994 North American Free Trade Agreement (Nafta). Mr Trump vowed for years to quit or renegotiate Nafta, which he blames for the loss of millions of US factory jobs to low-wage Mexico.

House Speaker Nancy Pelosi gave the USMCA a green light last week after striking a deal with the Trump administration, Canada and Mexico to strengthen labor enforcement provisions and eliminate some drug patent protections.

Ms Pelosi said she was not concerned about Democrats handing Mr Trump a political victory on the USMCA, as they are trying to remove him from office.

“It would be a collateral benefit if we can come together to support America's working families, and if the President wants to take credit, so be it,” she said during House floor debate before the vote.

The changes negotiated by Democrats, which include tighter environmental rules, will also set up a mechanism to quickly investigate labor rights abuses at Mexican factories. They have earned the support of several US labor unions that have opposed Nafta for decades.

US Trade Representative Robert Lighthizer made a concession by dropping a requirement for 10 years of data exclusivity for biologic drugs, a provision that Democrats feared would keep drug prices high and that they called a “giveaway” to big drug makers.

Some of the most ardent trade skeptics in the US Congress have voiced support of the deal, including Representative Debbie Dingell, who represents an autoworker-heavy district in south-eastern Michigan. Ms Dingell said in television interviews that she backed the Bill, even though she was skeptical it would bring auto jobs back to Michigan.

Representative Ron Kind, a pro-trade Democrat from Wisconsin, one of the top dairy-producing states, praised new access to Canada's closed dairy market under the USMCA.

“A no vote is a return to the failed policy of the old Nafta, the status quo, rather than this more modernized version,” Mr Kind said in floor debate.

The agreement modernizes Nafta, adding language that preserves the US model for Internet, digital services and e-commerce development, industries that did not exist when Nafta was negotiated in the early 1990s. It eliminates some food safety barriers to US farm products and contains language prohibiting currency manipulation for the first time in a trade agreement.

But the biggest changes require increased North American content in cars and trucks built in the region, to 75% from 62.5% in Nafta, with new mandates to use North American steel and aluminum.

In addition, 40 per cent to 45 per cent of vehicle content must come from high-wage areas paying more than US$16 an hour - namely the US and Canada. Some vehicles assembled in Mexico mainly with components from Mexico and outside the region may not qualify for US tariff-free access.

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