On the sidelines of the international G-20 (Group of Twenty) forum in Buenos Aires, Argentina, U.S. President Donald Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto signed today the new United States-Mexico-Canada Agreement (USMCA), launching the formal process to replace the North American Free Trade Agreement (NAFTA). During the signing ceremony, Trump stated, “This new agreement will ensure a future of prosperity and innovation for Mexico, Canada and the United States.”
Today’s ceremony is a significant milestone for Trump, who focused on the modernization of the NAFTA in his presidential campaign, and follows an intense period of negotiations completed in September 2018 (see Trump and Trade Update, October 2, 2018). The signing ceremony also occurred on Nieto’s final day in office and despite the parties’ continuing disagreement over the Section 232 tariffs the United States has placed on steel and aluminum imports from Canada and Mexico. In brief remarks, Trudeau raised the need to remove these tariffs, stating that “With hard work, good will and determination, I’m confident we will get there,” and adding that “Our shared interests, prosperity and security demand it.”
While the USMCA has now been signed, the trade agreement must still be ratified by Congress. Trump notified Congress on August 31, 2018 of his intent to sign the agreement, and this notification triggered certain procedures under the Trade Promotion Authority (TPA) (formally known as the Trade Preferences Extension Act of 2015). Now that the USMCA is signed, the Trump administration has 60 days under TPA to report to Congress changes to U.S. law that are required to comply with the terms of the agreement. Also, within 105 days of the agreement being signed, the U.S. International Trade Commission (ITC) must complete a study of the agreement’s economic impact (see Trump and Trade Update, October 16, 2018 and ITC Notice of Investigation). Eventually, the Congress will have to pass legislation to implement the USMCA, a final step in the implementation process which may have become more difficult with the Democratic Party assuming control of the House of Representatives in the next session of Congress in January 2019. While Trump expressed confidence today that the USMCA will pass Congress in the new year, bilateral opposition in both houses of Congress is mounting, which may lead to more side letters on certain issues or concessions on other unrelated legislation. The legislatures in Mexico and Canada must also ratify the trade agreement, but approval in both without much pushback is expected. Most trade analysts are predicting that the terms of the agreement may not truly be finalized and implemented until well into 2019.