Reflecting on the USMCA’s Deadlock. A Follow Up (I)

by Laura Lai/ Comment

Last year in November I was ‘Reflecting [on this blog] on the USMCA Regional Free Trade Agreement’s Deadlock’ (click here to read the article). My reflection's starting points were that the regional free trade agreements were as old as the Australian-New Zealand ‘CER’ agreement in the 1920s and that every continent has its free trade agreements: North America had NAFTA, South America has MERCOSUR, Asia has the ASEAN, and so are the European and the African continent – with the difference that the European Union evolved from an economic project to a political supranational entity with a certain degree of national sovereignty loss.

            Another point I was making was the fact that NAFTA (‘The North American Free Trade Agreement’) was an outdated agreement, whose shortcomings were evident particularly in fields that were not even under discussions in 1994, such as biotechnology. Donald Trump was one of NAFTA’s earliest critiques and the updating of this old agreement to USMCA (‘United States – Mexico – Canada Free Trade Agreement’) – that addresses more fairly all the trade imbalances – was included in the campaign to ‘Make America Great Again’.

            I was pointing that 12 million jobs depended on the USMCA and I was bringing concrete examples of commercial links between some of the American States with either Canada or Mexico: the State of Indiana (main trade deals are with Canada and Mexico and more than 17,000 jobs depend on this trade, let alone the fact that Indiana is second largest automobile manufacturer in the U.S and home to several car brands);  the State of Minnesota (undertaking more than 70,000 farming operations exports mainly to Canada and Mexico); the State of Colorado, which is quite in the middle of the United States, not necessarily in the vicinity of either Canada or Mexico, did a $2,7 billion trade with Canada and Mexico in 2017, mainly in processed food and machines; and the examples can go on with Missouri, Pennsylvania, Alaska and others.

            Mexico was the first country to ratify the USMCA, Canada ratified soon after, but despite the official visit of the Canadian Prime Minister to the United States to urge the ratification of the USMCA, and despite the U.S. President’s hope to see this trade agreement passing the Congress before the Thanksgiving recess, the USMCA was facing a deadlock because the Democrats were investing lots of time in impeachment procedures and because they needed impact assessments of the USMCA on the environment, workers’ rights and job creation particularly in areas with a job loss in the last 25 years.

Almost half of the U.S. trade involves three countries: its neighbors Canada and Mexico, and China. It makes perfectly sense, if a candidate runs with a slogan ‘Make America Great Again’ to renegotiate the trade agreements with these three countries. It was mid-January when it was announced the triumphant end of ‘Phase One’ of a trade agreement with China. China’s commitment to purchase American agriculture goods worth $50 billion was considered a ‘monumental achievement’ (1). Following this dynamic in US-China trade negotiations and positive steps made to replace NAFTA with the USMCA, the ‘Wall Street Journal’ quoted an agricultural trade publication in which 83 percent of farmers and ranchers approved this Administration’s performance. (2) Previous to this successful ‘Phase One’ trade agreement with China, Donald Trump concluded a $7 billion agreement with Japan - following a trip to Japan. And it was at the end of January 2020 that the U.S. President could sign the USMCA agreement.

            I wonder what part from the negotiations between the Democrats and the Republicans took the longest: Shall it be the impact on the environment? Shall it be the workers’ rights? Or the job creation in the areas with a severe job loss in the previous 25 years – under different administrations. I can’t possibly know, but it is also not the object of this writing exercise on this Writing Blog. However, although the USMCA signed, was not yet into force.

In the meantime a coronavirus pandemic seemed to have slapped countries and woke us up to a different reality to which all people and countries, somehow, needed to adapt. The United States was no exception. Surprisingly, the U.S. Bureau of Statistics were issuing in March encouraging employment results: 20,000 jobs were added in February, which brought the unemployment rate to a 50 years low to 3,5 percent. (3) Donald Trump himself expressed his surprise on the ‘really unthought-of’ achievement’ on the Hispanic American employment rate. (4) In May, although not yet fully healed by the pandemic and the U.S. already added 2,5 million jobs. (5) And for June, the Bureau of Labor Statistics announced an all time historical record of 4,8 million jobs created. (6) (to be continued)