Senior Democrat says Trump must change USMCA deal if he wants Congress to pass it

U.S. President Donald Trump’s new trade deal with Canada and Mexico needs changes to secure support from Democrats, according to a senior House Democrat in line to play a leading role on trade policy in the new Congress.

There needs “to be not only changes in the legislation but more enforcement” if the Trump administration wants votes from Democrats, said New Jersey Representative Bill Pascrell, who is in line to chair the Ways and Means Trade subcommittee, on Wednesday.

All three nations are preparing to sign the agreement during the Group of 20 leaders’ summit in Argentina taking place from Nov. 30-Dec. 1. The new trade deal will require approval by the new U.S. Congress that convenes next year.

The Canadian dollar erased an earlier advance of as much as 0.2 per cent and traded 0.1 per cent lower on the day as of 10:20 a.m. in New York, while the Mexican peso reversed most of its 0.9 per cent to trade up by around 0.1 per cent.

–With assistance from Benjamin Purvis.

Bloomberg.com

Trudeau says Canada wants a free trade deal with southeast Asian nations

SINGAPORE — Canada wants to walk down the path towards a free trade agreement with a bloc of 10 Asian nations as early as next spring, Prime Minister Justin Trudeau said Wednesday in his only opportunity to directly address the leaders of the Association of Southeast Asian Nations.

A preliminary study of a Canada-ASEAN trade agreement has been done, but experts suggest it could take years to finalize an agreement with the 10-nation bloc, which includes the Philippines, Indonesia, Brunei, Singapore, Malaysia, Thailand, Vietnam, Laos, Cambodia and Burma.

Trudeau told a leaders’ luncheon that exploratory talks could be wrapped up by the spring and negotiations to begin soon thereafter — timing that would be close to next fall’s federal election.

ASEAN nations combined have nearly 650 million people, an economy of US$2.8 trillion, and are already Canada’s sixth-biggest trading partner.

“Canada is resolutely pro-trade and Canada is very aware that the centre of economic gravity in the world is certainly shifting towards Asia and specifically towards southeast Asia,” Trudeau said during his remarks.

“The ASEAN nations represent extremely exciting, growing economies, looking to take their place in the world and Canada is very excited about working with you on that.”

He also made a pitch at the luncheon for ASEAN’s support when Canada bids for a seat on the United Nations security council.

Carlo Dade, an expert on Pacific trade with the Canada West Foundation, said there is no benefit to having a trade deal with ASEAN, since four of them — Brunei, Malaysia, Singapore and Vietnam — are already part of the Pacific trade deal and others have expressed interest in joining.

The agreement, known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — or CPTPP for short — is an ambitious agreement that likely won’t be matched if Canada negotiates one-on-one with ASEAN because their deals tend to be less comprehensive, Dade said.

“I’ll just be blunt: Trade negotiations with ASEAN, I think, would largely be a waste of time.”

Trudeau has spent two days in Singapore trying to situate Canada as a more favourable place for Asian companies than the United States, playing up Canada as a stable location economically and politically for trade and investment.

On Wednesday, he also met with Chinese Premier Li Keqiang, kicking off the meeting by saying the two leaders would have a “frank and open” talk.

International Trade Minister Jim Carr said the government remains interested in having a deal that helps female entrepreneurs, Indigenous Peoples and promotes other Canadian values, but warned a final agreement will take time to pull together.

“There is an opportunity for us to work with the Chinese government and the Chinese people in order to create opportunity — opportunity so people can fulfil their aspirations,” he said.

Later in the day, the Prime Minister’s Office said the two talked about expanding trade in agriculture, energy and clean technology sectors. The prime minister also raised concerns about China’s treatment of Uyghur Muslims and other minorities in China’s Xinjiang region during the meeting, Trudeau’s office said.

While the two sides did agree to find ways to reduce plastics and pollution in the planet’s oceans, countries, including those in Asia, are trying to find a counterbalance to China’s growing influence in the region, said Shuvaloy Majumdar, a Munk Senior Fellow at the Macdonald-Laurier Institute.

“It strikes me that the prime minister is moving in exactly the wrong direction with the wrong partner,” he said.

Coupled with the fact that Trudeau left last year’s ASEAN summit having angered the host nation’s leader, Majumdar said he doesn’t think Canada is well positioned in the region.

Trudeau angered Philippine President Rodrigo Duterte last year over comments about the Philippine government’s war on drugs, which has earned widespread condemnation for leaving thousands of suspects dead. And in September, MPs voted unanimously to strip Myanmar’s leader, Aung San Suu Kyi, of her honorary Canadian citizenship for her role in the atrocities against her country’s Rohingya people.

Trudeau’s meeting with China’s Li included talk to address to Rohingya crisis.

Canada still hoping to secure a comprehensive free-trade deal with China

OTTAWA — Canada is still hoping to secure a comprehensive trade deal with China despite suggestions last week it was instead aiming for sector-by-sector agreements.

Speaking in Beijing Monday after bilateral economic meetings, International Trade Minister Jim Carr said China is interested in a wide range of Canadian products across many different sectors.

But Carr says while Canada is in talks with China on a number of fronts, he insists efforts to promote deals involving individual sectors would not preclude the opportunity for a wide-ranging trade agreement between the two countries.

Carr says China’s interest in so many Canadian products could ultimately lead to a comprehensive trade agreement.

Last week, Treasury Board President Scott Brison told the Globe and Mail the best way to move forward more quickly with China on trade is to focus on opportunities for immediate gains through a sector-by-sector approach in areas such as food and agriculture.

A number of federal and provincial officials have been in China over the last week talking trade — discussions that come after Canada’s efforts last year to formally start free trade talks with China stalled amid diverging views on gender, labour and Indigenous rights.

If David Rosenberg ran the Bank of Canada: ‘I’d press the pause button’

Gluskin-Sheff chief economist thinks the outlook for Canada and the world is still very uncertain because of tariffs on China, household debt and Canada’s sinking oil price.

David Rosenberg talks to Financial Post’s Larysa Harapyn at the TSX.

Trump’s USMCA trade deal could be upended as Democrats vow to withhold support

WASHINGTON — President Donald Trump’s promise to quickly pass a revamped North American Free Trade Agreement has been upended by the midterm elections, with Democrats who will soon control the House vowing to withhold their support to extract greater protections for American workers.

Administration officials remain confident they will corral the votes for the new United States-Mexico-Canada Agreement (USMCA), which Trump speedily negotiated in September to claim a big win on one of his signature issues before the November elections.

While White House officials considered pushing the revised deal through the coming lame-duck session, they did not want to risk a backlash from lawmakers in both parties.

Democrats, emboldened by their midterm win and eager to outshine Trump as defenders of the American worker, are unlikely to sign off on any deal that does not include significant changes that labour leaders and newly elected progressives are demanding. That could involve reopening negotiations with Mexico, although U.S. and Mexican negotiators have both publicly ruled out that possibility.

“Trump made it seem like this was a done deal, but there is a long, long way to go,” said Rep. Bill Pascrell, D-N.J., who is likely to be named chairman of the House Ways and Means Subcommittee on Trade.

The House will consider the agreement first under the Constitution’s provision mandating that revenue bills originate in the lower chamber. A vote could take up to nine months or longer, according to senior administration officials.

House Democrats are particularly concerned about a provision that would require at least 30 per cent of the labour used to build each car in Mexico to be completed by workers earning at least US$16 an hour. That amount will rise to 40 per cent by 2023 but the US$16 wage is not indexed to inflation, meaning the increase will be diluted over time as prices rise.

The text of the agreement also requires Mexico to make it easier for workers to join unions.

All of these actions were intended to make it less likely that automakers and other manufacturers would shift American jobs south for cheaper labour. But Democrats and their allies in manufacturing unions — who have remained neutral on the proposed pact — maintain that the new requirements, while an improvement on the original NAFTA, do not go far enough.

They are demanding more specifics about how the deal will be enforced, and raising questions about whether the US$16-an-hour benchmark for Mexican workers — which is about four times the typical wage for Mexican autoworkers — is high enough to stanch the flow of American jobs to Mexico.

“Without enforcement you don’t have anything. Without it, you are, shall we say, just rebranding NAFTA,” Rep. Nancy Pelosi, D-Calif., said last week, days before voters swept her party back into power.

“Right now, it is a work in progress,” said Pelosi, a former speaker who is expected to reclaim that post. “Mexico has to pass a law about labour rights in Mexico, so that has not happened yet and that is a predicate of this agreement. Most important of all are the enforcement provisions in terms of labour and the environment. Enforcement, enforcement, enforcement.”

Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker Paul Ryan, R-Wis., have both said publicly that they will not take up the agreement this year, although several free-trade proponents in their own party, led by Sen. Patrick J. Toomey of Pennsylvania, are urging them to reconsider.

Toomey has his own reservations about the deal — he believes it includes too many potential restrictions on free trade — but he warned his fellow Republicans that entering a protracted negotiation with Democrats would be a losing strategy.

“I would be shocked — shocked — to learn that Nancy Pelosi is going to make passing new NAFTA, which would be a big win for the president, her top priority,” he said.

Robert E. Lighthizer, the U.S. trade representative, has repeatedly assured Trump that he will be able to sell the deal to Democrats and the leaders of the United Steelworkers Union, the AFL-CIO and the United Auto Workers Union, according to current and former White House officials.

“We are very confident that Congress will approve USMCA,” said Jeff Emerson, a spokesman for the U.S. trade representative, referring to the United States-Mexico-Canada Agreement.

“From the beginning, Ambassador Lighthizer has worked closely with Democrats and Republicans in the House and Senate on the renegotiation of this agreement,” he said, adding that the pact “is a balanced deal with strong provisions that will benefit U.S. businesses and workers and that enjoys broad support among key stakeholders.”

But there are signs that Lighthizer, who has a close working relationship with many labour leaders and pro-union Democrats like Sen. Sherrod Brown of Ohio, may have a tougher time than he anticipated.

“Words on a paper won’t stop jobs from going to Mexico, unless there’s real teeth behind them,” Brown said.

In late October, Leo Gerard, the president of the United Steelworkers Union and chairman of the U.S. trade representative’s labour advisory council, reviewed the preliminary text of the deal and concluded that the new agreement contained provisions that “undermine the interests of workers and consumers” while doing too little to “curtail the illegal suppression of wages in Mexico,” according to a letter sent to Lighthizer.

In the letter, Gerard took issue with the administration’s decision to maintain steel and aluminum tariffs against Canada and questioned the effectiveness of the agreement’s proposed automotive rules of origin intended to increase the percentage of cars built by American workers.

But he saved his sharpest criticism for the Mexican wage provisions, arguing that the US$16 hour average wage mandated in the deal “is arguably too low to make a significant difference” in persuading manufacturers to keep their plants in the United States. He suggested making the wage standard a minimum, rather than an average, and suggested indexing it to inflation to ensure that the wage increases aren’t “meaningless.”

Andrés Manuel López Obrador, a populist who was elected president of Mexico in July, supports wage increases but it is unclear if he can pass sweeping labour reforms through the country’s legislature.

During a private meeting with House members of both parties last month, Lighthizer conceded that the labour provisions needed to be strengthened, but he declined to reopen talks with Mexico, according to three people who attended the meeting.

The NAFTA vote will be up or down and Congress cannot amend the text, according to the rules governing fast-track trade agreements. But negotiators from each country are free to negotiate potential changes to secure enough votes for passage in their respective chambers.

Mexican officials have said the labour standards in the deal are sufficient. Emerson said Lighthizer rejected as “false” the idea that he would consider reopening the deal. The labour standards included in the deal, he added, “are ambitious and enforceable,” he said.

But Rep. Sander Levin, D-Mich., who attended the meeting last month, called the provision “a major flaw” and said “there will have to be some attempt to discuss this with Mexico” for the deal to win Democratic backing.

Lighthizer remains eager to conclude a deal as quickly as possible, people close to him said, so he can focus on China, whose trade practices he sees as a far bigger threat to American workers than NAFTA, which has helped stitch together the economies of Mexico, Canada and the United States.

But there’s one tactic he refuses to use to break the logjam: withdrawing from NAFTA as a means of pressuring legislators to act quickly.

Trump has raised the possibility repeatedly since being elected, but has been talked out of it by Lighthizer and other advisers, most recently the National Economic Council director, Larry Kudlow, according to a senior administration official with knowledge of the situation.

U.S., Mexico, Canada ministers to sign trade deal by end of the month

MEXICO CITY — Cabinet ministers from the United States, Mexico and Canada will sign a new trade agreement on Nov. 30, Mexico’s economy minister said on Thursday.

The deal will be signed in Buenos Aires, Argentina, the Mexican Economy Minister Ildefonso Guajardo told reporters at an event in Mexico City. Argentina is hosting the G20 international forum for governments and central bank governors.

It was yet to be determined whether the presidents and prime minister will participate in the signing, Guajardo said.

“What’s clear is that the signing will take place on Nov. 30,” Guajardo said.

After more than a year of negotiations to revamp the North American Free Trade Agreement, the United States and Canada reached a last-gasp deal in September. Mexico and the United States had already struck a bilateral agreement.

Legislators from the three countries still have to approve the pact, officially known as the United States-Mexico-Canada Agreement (USMCA), before it goes into effect.

© Thomson Reuters 2018

Is USMCA in trouble? What’s next for our trade deal

International lawyer Mark Warner talks to Financial Post’s Larysa Harapyn about the impact of the U.S. midterm elections on the trade deal, the opportunities for Canada and the timeline for approval.

How Democrats could help — or hurt — Trump’s next trade policy moves

President Donald Trump may be encouraged to pursue more protectionism and could even get a hand from Democrats on his trade agenda — a rare area of potential cooperation that will test his willingness to bargain with a new negotiating partner, likely to be Democratic leader Nancy Pelosi.

Here are some areas where the White House and a new Democrat-controlled House of Representatives may agree and disagree:

China Trade War

Until Trump campaigned for the presidency, seeking a tougher stance on China had historically been a policy issue for Democrats. With the Republican president aligned with them, analysts see opportunities for cooperation between the White House and Democrats, though they won’t see eye-to-eye on everything.

“Trump out-hardlines them and Democrats have been reasonably enthusiastic cheerleaders” for getting tough on China, said Edward Alden, a senior fellow at the Council on Foreign Relations. Democrats will largely support Trump’s China agenda, “unless it becomes clear that an escalating tariff war is starting to do serious harm to the economy,” he said.

One place Democrats could push for a tougher stance is on currencies. Trump promised on the presidential campaign trail that he would label China a currency manipulator, but has stopped short of doing so in the four foreign-exchange reports released since he took office in January 2017.

“It would not surprise me at all to see a more aggressive push on currency,” said Scott Paul, president of the Alliance for American Manufacturing, a coalition of domestic industry and the United Steelworkers. But he cautioned that it was very unlikely that there would be enough support in both the House and the Senate to pass a currency bill that Trump could sign into law.

New NAFTA

At the top of Congress’ 2019 agenda is a vote on the U.S.-Mexico-Canada Agreement that was struck in late-September to update the North American Free Trade Agreement. Trump and his counterparts are scheduled to sign the deal on the sidelines of the Nov. 30-Dec. 1 Group of 20 summit in Buenos Aires.

Alden said that while Democrats will likely be skeptical of some of the provisions, including on patents, labour rights and environmental protections, they won’t want to kill the deal. Trump can withdraw from NAFTA to put pressure on lawmakers to pass his new agreement by setting up a six-month period before the U.S. is no longer party to the existing agreement.

“I have no doubt Trump will pull the plug on NAFTA if he can’t get the USMCA through Congress,” Alden said.

Democrats could leverage their vote on Trump’s trade deal and push for an infrastructure package that Trump has long promised and would align with their own priorities. “I don’t know how much, if any, traction that would get but that’s something that would be attractive for many folks,” Paul said.

EU, Japan

The Trump administration starts trade talks with Japan and the European Union early next year. With Democrats in command of the House, these negotiations are expected to focus on autos and agriculture.

There may not be a lot of daylight between Trump and the Democrats. Both will want to focus on those areas, and Democrats also have fewer concerns over labour and environmental issues in those talks.

The majority of Democrats say the EU and Japan are fair trading partners — a perception that has dramatically shifted in the past 25 years, according to a June 2018 Gallup survey. The poll shows 70 per cent of Democrats — versus 42 per cent of Republicans — say the EU is a fair trading partner and 65 percent of Democrats say Japan is a fair partner. In 1993, only 51 per cent said so about the EU and 27 per cent did about Japan.

But Bruce Stokes, director of global economic attitudes at Pew Research Center, noted trade is a “very partisan issue” and said the survey results could therefore be more of a reflection of party politics and less a reflection of attitudes toward the matter.

National-Security Tariffs

Trump has threatened to impose tariffs on foreign cars and car parts in the name of national security. A Commerce Department report that could lead to tariffs is due by February and several attempts by lawmakers this year to limit Trump’s unilateral tariff powers have failed.

Lawmakers weren’t able to block the president from slapping duties on imported steel and aluminum on national security grounds earlier this year.

Alden said it seemed “highly unlikely” that would change with Democrats controlling the House because any legislation requires a two-thirds majority to override Trump’s veto.

Paul said that a “very aggressive action” on auto tariffs “could change the dynamic in the Congress somewhat.”

At the same time, he said “Democrats have a meaty agenda they will have to pursue, and reversing the Trump administration’s trade agenda is not at the top of the list — especially because they happen to agree with him.”

Former Trump economic adviser Gary Cohn said he didn’t expect the Democrats’ election gains will speed an end of the trade war.

“I don’t think there’s an instant cure for the trade issue,” Cohn told Bloomberg’s New Economy Forum in Singapore as assembled business and political leaders digested the results Wednesday. “I wish that I could sit here and say, after the midterm elections, the White House and the administration understand they’ve gotta solve trade issues.”

Bloomberg.com