By Jason Pye
March 13, 2019 at 5:00 am ET
Congress needs to step up and approve the United States-Mexico-Canada Agreement to ensure a stable economic future with our neighbors. Just as importantly, Congress must pass legislation like the Bicameral Congressional Trade Authority Act, H.R. 940 and S. 287, to restore its constitutional authority over trade.
While most of the administration’s rhetoric on trade is concerning, it’s refreshing to see this administration come to an agreement with leaders from Canada and Mexico on a new trade deal. The administration’s previous criticism of the North American Free Trade Agreement and unwillingness to get a deal done caused great uncertainty. USMCA will have distinct benefits for the economy.
First and foremost, it’s vitally important that a trade agreement between the United States, Mexico and Canada exists. This brings much needed certainty to the market and will ensure that our economy has a chance to prosper, instead of floundering in volatility. A trade deal will keep prices low for consumers and allow businesses more flexibility to innovate and create jobs. This is the greatest achievement of these three governments in this deal.
Congress must ensure that the American people have this certainty by thoroughly reviewing USMCA, making sure that President Donald Trump does not precipitously withdraw from NAFTA before a new deal is approved. Only Congress has the authority to withdraw from such an agreement, and Congress must assert its authority to protect our economy. Trade deals carry the weight of law and cannot be executed unilaterally by the executive branch, any more than a president could unilaterally repeal a law.
Despite the necessity of a trade deal, policymakers should not overlook some of the flaws of USMCA. A provision of the agreement requires that three-quarters of auto parts be produced in North America. This will more than likely raise car prices for North American consumers and cut off domestic retailers from their supply chains abroad. There are very few winners in this scenario and a handful of losers. Protectionism enriches some special interests at the expense of many others. This is no exception.
Automakers have already been suffering under the weight of the Trump administration’s steel and aluminum tariffs. The USMCA did not address them at all, and they will remain in place on top of this new sourcing provision. As a result, domestic automakers such as Ford have seen their stocks dip to lows they haven’t seen in years. Ford has been hit particularly hard by this trade war and has announced worker layoffs as a result of it. Despite Trump’s claims, this is hardly being a champion of American industry. Instead, his trade war is actively hurting companies based right here in the United States.
As if that were not enough, another requirement of the deal stipulates that 40 percent of auto parts must be made by workers making $16 per hour. Not only is this above and beyond the most radical leftist wage demands, it’s also imposing that sort of minimum wage for other countries as well. A developing nation such as Mexico may not have a workforce able to command such a wage level, and this provision could harm their economy in the long run. Yet, all of this is coming to fruition under a Republican administration.
Lastly, this deal essentially makes it impossible to negotiate a potential future free trade agreement with China. There’s a provision that allows one of the three nations to be kicked out of the agreement if they begin negotiating a free trade agreement with a non-market economy, clearly aimed at China. This is unbelievably bad policy. America has nothing to gain by consistently antagonizing the country from whom we import most of our goods. The Trump administration’s blustering will come back to bite American businesses sooner, rather than later.
Despite these flaws, Congress must keep sight of the greater objective of having a firm trade deal in place. The typical protectionism must not win the day. The president has claimed that this country was “built on tariffs” and repeatedly claimed that they are the only way to ensure fairness. While he may believe that, it’s up to the legislative branch to decide. Along with approving USMCA, Congress must also pass the Bicameral Congressional Trade Authority Act. This bill would return authority of trade back to Congress, which, as Article I of the Constitution makes clear, is a responsibility of the legislative branch.
We need to be serious about the impact this administration’s protectionism will have on America’s economy going forward. Congress should step in and reclaim accountability on tariffs and trade deals. They should also diligently analyze this deal and any future trade deals to ensure openness in trade, and that a trade deal remains in place at all times. Even though it’s good that this deal got done, we need to demand more from our elected leaders and demand better for our economy.
Jason Pye is the vice president of legislative affairs for FreedomWorks.
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