Washington, D.C. - U.S. Senator Pat Toomey (R-Pa.) issued the following statement following his vote in opposition to the United States Mexico Canada Agreement (USMCA):
"For the first time in American history, we're enacting a trade agreement that restricts free trade and reduces economic growth. Unlike its predecessor NAFTA, USMCA contains many protectionist provisions that are designed to reduce the exchange of goods between the United States and Mexico. According to the nonpartisan Congressional Budget Office, USMCA raises tariffs, which are taxes, by $3 billion. This means higher prices - particularly on automobiles - for American consumers. Outside of a few necessary modernizations and modest market access improvements for Pennsylvania's dairy farmers, USMCA is a step backwards and I could not support its passage."
Last month, Senator Toomey laid out his concerns about USMCA in an op-ed for the Wall Street Journal:
Op-Ed: I'll Vote Against This Antitrade Agreement
Wall Street Journal
Senator Pat Toomey
December 19, 2019
Congress will likely approve President Trump's U.S.-Mexico-Canada Agreement, but it won't get my vote. The USMCA's many flaws arise from its unprecedented intent. It is the only trade pact ever meant to diminish trade. Since Nafta's implementation, American exports to Mexico have grown more than fivefold. But imports grew even more, widening the trade deficit. The Trump administration finds this unacceptable, even though the trade deficit is mostly meaningless. Hence USMCA has a myriad of provisions to warm the hearts of protectionists.
For starters, USMCA terminates free trade in cars and auto parts. To avoid new tariffs, the Mexican auto sector would have to comply with onerous new content requirements (country rules of origin) and pay wages far above prevailing Mexican rates. These provisions, by design, would make Mexican factories uncompetitive. They would also raise car prices, shrink North American auto exports and eventually reduce U.S. auto employment.
Another first is USMCA's 16-year expiration date. That will chill trade and investment by introducing considerable uncertainty about the future terms of trade. Evidently, that's the idea in USMCA.
Another flaw is the drastic reduction of the Investor-State Dispute Settlement mechanism. U.S. investors don't always get a fair adjudication of their business disputes in foreign courts, even in Canada and Mexico. That's why Nafta, like almost every other trade agreement, created a multilateral resolution process for U.S. investors. To the delight of Canada and Mexico, USMCA nearly abolishes it. That will diminish the ability of U.S.-based multinational companies to make money in those countries. Some in the administration believe that is somehow good for America.
Then there are the changes Speaker Nancy Pelosi and the AFL-CIO sought, to which U.S. Trade Representative Robert Lighthizer happily agreed. First are the laws to facilitate unionization of Mexican factory workers. Previous trade agreements left trading partners' labor laws for them to decide. But USMCA goes well beyond requiring labor-organizing laws. U.S. taxpayers will pay $45 million a year to enforce these Mexican laws.
In keeping with the protectionist theme, accusations of Mexican labor law violations will presumptively be deemed to have adverse effects on trade and may result in, you guessed it, tariffs and even embargoes. Imagine the mischief protectionists will make of this, including targeting U.S. firms operating subsidiaries in Mexico. No wonder union leaders and Congress's chief protectionists are supporting USMCA after opposing nearly every previous trade agreement.
Mrs. Pelosi also succeeded in eliminating protection for biologic drugs. U.S. law provides 12 years of protection from copycats (equivalent to patent protection). Mr. Lighthizer had negotiated for 10 years in USMCA. Speaker Pelosi insisted on changing that to zero. Zero it is.
USMCA contains modernizing features for digital trade and some very modest easing of Canadian agricultural restrictions on certain American farm products. But these changes didn't require the protectionist features of USMCA.
I still believe free trade is far better for my constituents than restrictive, managed trade and hope USMCA's protectionism doesn't become the template for future trade agreements.
Mr. Toomey, a Republican, is a U.S. senator from Pennsylvania.