President Donald Trump has taken a big step in the direction of House Democratic demands in order to win approval of his new U.S.-Mexico-Canada Agreement, several private sector officials closely following the discussions said.
A counterproposal made this week by U.S. Trade Representative Robert Lighthizer showed “significant flexibility” in addressing concerns raised by Democrats in four areas of the pact: enforcement, labor, environment and pharmaceuticals, one of the people said.
The administration has agreed to fix problems with how disputes between governments are resolved that plagued the North American Free Trade Agreement and were not corrected in the USMCA deal, the people said.
USTR has also accepted the idea of binational inspection teams to ensure that Mexico lives up to tough new labor commitments. In a fourth area, the two sides are discussing a provision that could potentially reduce the 10-year period of intellectual property protection for biologic medicines in the agreement.
“This is more than a step in the right direction,” a second person tracking the discussions said. “We’re marching down the path to USMCA implementation here.”
Democrats, who received the proposal on Thursday, aren’t saying yet whether the changes will be enough to lead House Speaker Nancy Pelosi to bring the agreement to the floor for a vote. The Office of the U.S. Trade Representative did not respond to a request for comment and several congressional aides said they’d been sworn to secrecy about the discussions.
“I can’t confirm the accuracy of this,” Erin Hatch, a spokesperson for House Ways and Means Democrats, replied when asked for a comment.
However, given Trump’s desire to win approval of the USMCA, it would not be surprising for Lighthizer to move aggressively to meet House Democratic demands, said Greg Mastel, a former Democratic staffer on the Senate Finance Committee.
“In my opinion, the things the Democrats have asked for, with perhaps one or two exceptions, were doable,” Mastel said. “I am certain that those who understand these fundamentals, which include Ambassador Lighthizer, would want to act accordingly to get the agreement passed.”
Clete Willems, a former White House official who served in the Trump administration from 2017 until early 2019, also said he saw a good chance for the two sides to reach a deal.
“It’s clear that the administration and Democrats on the Hill are working very well together to address the outstanding issues. I think there’s some real positive momentum here, heading into the fall,” Willems said.
On the labor and environmental front, the Trump administration already took a major step toward addressing Democratic concerns by incorporating those provisions into the core text of the agreement, instead of relegating them to side letters as they were in NAFTA.
However, Democrats have had concerns about the enforceability of the provisions, given the potential carried over from NAFTA for countries to block panels to hear disputes.
Partly because of that situation, there has been no government-to-government litigation under NAFTA in nearly 20 years. And Lighthizer, an opponent of binding dispute settlement, has previously been reluctant to give up the U.S. right to block panels, particularly in cases involving an attack on U.S. trade remedy laws.
But now, “I’m told that they essentially agreed to fix state-to-state dispute settlement,” one of the sources said.
Formation of panels is now an imperative and the language will be amended through a self-executing amendment to the deal that Mexico and Canada both agreed to, another source said.
Sens. Ron Wyden (D-Ore.) and Sherrod Brown (D-Ohio) have also proposed strengthening labor enforcement by allowing the U.S. and Mexico to jointly inspect and verify that specific factories are complying with USMCA’s labor standards. In the case of noncompliance, the U.S. could revoke tariff benefits on the factories’ products.
While USTR appears to have accepted that idea, several sources noted that the details of how it would work in practice need to be hashed out.
“What we’ve heard is they’ve said they’re willing to go with that element of Brown-Wyden binational inspection teams, but it still needs to be defined as to what that authority will look like,” one of the sources said.
In addition, Mexico has expressed concern about how the element would work, a business official said — which could make it difficult for the proposal to make it into the final deal.
When U.S. lawmakers and administration officials recently floated the idea in Mexico of U.S. authorities conducting inspections to see whether Mexico was fulfilling its commitments, the idea was “flatly rejected,” a former Mexican government official said.
“That clearly was rejected on the basis that U.S. authorities determining whether or not Mexico has fulfilled its own commitments sounds kind of extraterritorial,” the official said. “It’s not that the Mexican authorities were unwilling to have any oversight whatsoever. It’s just that for political reasons … the Mexican authorities are the ones who really should be doing that, not the U.S. authorities.”
A private sector official said USTR has agreed in principle to make the process reciprocal, meaning Mexico could request joint inspection of U.S. facilities. That should make it easier for Mexico to accept, he added.
Democrats were also disappointed that the USMCA does nothing to address climate change. The absence of such a provision is “the most glaring flaw for the future of trade and the future of the planet,” Rep. Earl Blumenauer (D-Ore.), chairman of the House Ways and Means Trade Subcommittee, said at a hearing on the USMCA in May.
Given Trump’s decision to pull out of the Paris climate accord, hopes have been low that Lighthizer would be able to offer much on that front.
However, Democrats have raised other environmental concerns about the USMCA that are less politically awkward for Trump to accommodate.
Those include the enforcement of seven multilateral environmental agreements covering endangered species, ozone-depleting substances, tuna fishing, marine pollution, wetlands, whaling and Antarctic marine living resources.
Democrats have also pushed for action on wastewater and pollution from recycled batteries that USTR appears willing to address, one of the sources said.
The last area concerns the length of intellectual property protections for biologics, a class of medicines made from living materials, instead of chemicals.
The USMCA provides 10 years of protection, meaning that other manufacturers have to wait that long to have access to information to help them make biosimilars, which are near copies of the original drugs.
The United States currently provides 12 years of protection, but some Democrats have proposed reducing it to as low as seven or five years.
Under the proposal, if those efforts are successful, the new U.S. level would become the requirement for Canada and Mexico as well.
However, any push by Democrats to reduce the protection period would face strong resistance from brand-name drug manufacturers, who argue they need 12 years of data protection to recoup all the costs of developing the new medicines.
As such, several sources cautioned that the USTR proposal could face tough resistance from at least some Democrats involved in the negotiations.
By DOUG PALMER
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