US, Canada and Mexico sign agreement - again - to replace Nafta

[WASHINGTON] Top officials from Canada, Mexico and the United States signed a fresh overhaul of a quarter-century-old trade pact on Tuesday that aims to improve enforcement of worker rights and hold down prices for biologic drugs by eliminating a patent provision.

The signing ceremony in Mexico City launched what may be the final approval effort for US President Donald Trump's three-year quest to revamp the 1994 North American Free Trade Agreement (Nafta), a deal he has blamed for the loss of millions of US manufacturing jobs.

The event at the National Palace was attended by Mexico President Andres Manuel Lopez Obrador, Canadian Deputy Prime Minister Chrystia Freeland, US Trade Representative Robert Lighthizer, and US White House adviser Jared Kushner.

The result of a rare show of bipartisan and cross-border cooperation in the Trump era of global trade conflicts, the deal was inked the same day as he became the fourth US president in history to face formal impeachment.

It quickly got bogged down in more party division, however, as US Senate Majority Leader Mitch McConnell said he would likely wait for a vote on the deal until after the impeachment trial.

Nonetheless, Mr Lighthizer called it "a miracle" that actors from across the political spectrum had come together, saying it was a testament to the benefits of the deal. Mr Lopez Obrador credited Mr Trump for working with him, while Ms Freeland celebrated a win for multilateralism.

"We have accomplished this together at a moment when, around the world, it is increasingly difficult to get trade deals done," she said.

The US-Mexico-Canada Agreement (USMCA) was signed more than a year ago to replace Nafta, but Democrats controlling the US House of Representatives insisted on major changes to labour and environmental enforcement before bringing it to a vote.

The delay at times threatened to scuttle the deal, creating investment uncertainty in all three countries and worrying US farmers already suffering tariffs stemming from Mr Trump's trade war with China.

Intense negotiations over the past week among Democrats, the Trump administration, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico's low-wage advantage, including verification of compliance at the factory level by independent labor experts.

"It is infinitely better than what was initially proposed by the administration," House Speaker Nancy Pelosi told a news conference, adding that USMCA was now ready for a House vote.

Some Mexican business groups fear that Mr Lopez Obrador and his chief negotiator, Deputy Foreign Minister Jesus Seade, have ceded too much, and called the labour verification a violation of Mexican sovereignty.

Gustavo Hoyos, president of employers federation Coparmex and a vocal Lopez Obrador critic, called the government "a bad negotiator." Other business groups focused on the positive and welcomed the looming end to months of uncertainty.

Mr Seade himself said some of the changes were reasonable but not necessarily "good for Mexico."

NEW WRINKLE

Republican and Democratic US lawmakers say there is broad support for revising the pact, which backers say encompasses US$1.2 trillion in annual trade across the continent and supports 12 million US jobs and a third of American agricultural exports.

US House Ways and Means Committee Chairman Richard Neal, a Democrat, said sections of the text would be reviewed by lawmakers, but he saw no reason for "unnecessary delays" in bringing it to a vote on the House floor.

However, in a new wrinkle to swift ratification in the United States, Mr McConnell said the Republican-controlled Senate would not take up the deal before congressional recess, potentially pushing the vote into next year.

That seemed to put him at odds with Trump spokeswoman Stephanie Grisham, who said the White House would "push hard" to get the implementing bill passed before year end.

Pelosi spokesman Henry Connelly said Mr McConnell had "no excuse" not to bring up USMCA, pointing to fast approvals of previous trade pacts.

Mr Trump launched a renegotiation of Nafta in his first year in office, intent on delivering on his 2016 campaign promise to replace what he has derided as the "worst deal ever." Canadian and Mexican leaders reluctantly agreed to join the negotiations with their largest trading partner.

"America's great USMCA Trade Bill is looking good. It will be the best and most important trade deal ever made by the USA. Good for everybody," Mr Trump tweeted on Tuesday. "Importantly, we will finally end our Country's worst Trade Deal, Nafta!"

For Democrats, the deal serves as a retort to Mr Trump and Republican assertions that their only agenda was pursuing his impeachment.

In addition to the labour provisions, Democrats said they won elimination of a 10-year data exclusivity period for biologic drugs from the agreement, which they feared would lead to higher US drug prices.

But Ms Pelosi said she lost her bid to remove liability protections for internet service providers, a provision she had called a "giveaway" to big tech companies.

Mr Lighthizer included a last-minute demand of Mexico for a tighter definition of steel and aluminum in the deal's automotive rules of origin - to be "melted and poured" in North America.

While USMCA originally required 70 per cent of the metals used in North American vehicle production come from the region, it did not specify production methods, opening the door to the use of semi-finished metals from China and elsewhere.

Mexico and Canada agreed to a seven-year phase-in of the new standard for steel, industry sources familiar with the deal said. The aluminum demand was dropped, but with the caveat that it would be reconsidered in 10 years.

REUTERS