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New Nafta Is Threatened by Partisan Split Over Enforcement

A sharp divide between Democrats and the Trump administration over how to enforce trade rules is threatening to delay or derail a congressional vote on a new version of the North American Free Trade Agreement.

Led by House Speaker Nancy Pelosi, Democrats want the administration to add provisions to last year’s pact with Canada and Mexico that will ensure Mexico enforces environmental protections and allows its workers to form unions freely.

“Right now, the president’s Nafta update can’t be enforced,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate committee that oversees trade. “No matter how good a deal looks on paper, it doesn’t mean much if you can’t make sure the other countries live up to their end of the bargain.”

President Trump, who regularly speaks of his trade deals as a win at political events, modified his message Monday at his rally in El Paso, Texas, offering a disclaimer that the U.S.-Mexico-Canada Trade Agreement, and any economic benefits it may offer American workers, hangs on congressional approval.

“We’re replacing Nafta with a brand new US-Mexico-Canada Agreement that everybody is loving,” he told the crowd of supporters. “We gotta get Congress to approve it. There is an obstruction in Congress. ….”

As the White House prepares for a potential fight to get its deal through Congress, an administration official said it was considering outsourcing lobbying efforts to the U.S. Chamber of Commerce and officials with the office of Rep. Kevin Brady (R., Texas), who was the chairman of the House Ways and Means Committee before the Democrats took control of the House following last fall’s midterm elections.

The hope is to have people dedicated almost exclusively to ensuring USMCA’s passage in Congress and be able to address specific issues of interest to Republicans and Democrats, the official said.

In the area of enforcement, most Democrats and Republicans in Congress want mechanisms in trade agreements designed to hold all partners to account through international arbitration panels or other means. But the Trump administration opposes ceding enforcement to such panels, believing Washington could face binding decisions that undermine U.S. sovereignty.

Mr. Lighthizer’s office declined to comment, but recently told a group of U.S. senators that existing U.S. trade law could be used to enforce violations, a Senate aide said.

Still, the administration needs the support of Democrats: The USMCA requires ratification in the House and Senate as well as legislatures in Canada and Mexico before it could replace the original Nafta that took effect in 1994.

If Mrs. Pelosi’s party remains unified, she could block consideration of USMCA, either by changing the rules of the House or triggering a mechanism inserted by Mr. Wyden into the fast-track trade law — which governs how trade pacts are passed — that would prevent the agreement from getting expedited consideration

“Hopefully they’re resolvable,” Mrs. Pelosi said last week of the outstanding issues, “because I’m optimistic always.”

The chairman of Senate Finance Committee, Sen. Chuck Grassley (R., Iowa), told reporters Tuesday that the differences could be resolved by side agreements addressing “the environment, labor and enforcement” issues.

Mickey Kantor, the U.S. trade representative under former President Bill Clinton, said it was always the intent under the original Nafta to strengthen labor and other provisions over time. “Why Lighthizer or the president is against these is an interesting question,” said Mr. Kantor, now a partner at law firm Mayer Brown in Los Angeles. “They have this — I think — unwarranted opposition to enforcement provisions in international agreements.”

Mr. Lighthizer negotiated some changes to the pact aimed at streamlining the enforcement process, but Mr. Kantor and others say the system still allows the U.S. or another country to steer clear of binding decisions from enforcement panels, just as with the existing Nafta.

The pact gives workers the ability to petition for higher pay, and requires the three countries to abide by similar environmental rules. Mr. Lighthizer also added rules aimed at ensuring more high-wage labor in the auto industry.

Some congressional aides say the White House and Capitol Hill need to iron out differences by summer, before Canadian national elections complicate ratification by the three countries. Waiting until late 2019 risks potentially fatal inference from the U.S. presidential campaigns.

Mr. Trump also has some leverage. He has threatened to withdraw from the existing Nafta as a way of spurring Congress to pass his new version of the pact, helping fulfill a 2016 campaign promise. Most of the business community has rallied around Mr. Trump’s deal.

One option for the Trump administration would be to persuade a small number of business-friendly Democrats to join with Republicans and pass the deal, perhaps in exchange for limited tweaks to help enforce labor rules under U.S. law.
Source: Dow Jones

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