The Prevailing Lesson from NAFTA & USMCA: All Trade is a Work in Progress

Giovana Oaxaca
January 29, 2020

The House passed the United States-Mexico-Canada Agreement Implementation Act (USMCA), also known as NAFTA 2.0, mid-December after more than a year of intense negotiations. The revised agreement delivers stronger rules for labor and the environment, and a new mechanism for enforcement of its numerous obligations, while also dismantling an unscrupulous settlement regime letting corporations off the hook for violating domestic laws. The new agreement also strips Big Pharma giveaways enshrined in the President’s first draft. Ultimately, the agreement will attempt to modernize and ameliorate some of the 1990’s North American Free Trade Agreement’s (NAFTA’s) flaws. All that is to say, the USCMA constitutes a deliberate attempt to reign in the adverse impacts of trade liberalization under the previous NAFTA standard. The USCMA is the floor for all future agreements.

The product of negotiations between House Democrats’ Trade Working Group—led by House Speaker Nancy Pelosi and Ways and Means Chairman Richard Neal—and the White House, the revised agreement addresses serious flaws in the initial proposal that left President Trump’s desk in 2018.  Trump’s deal included Big Pharma giveaways, lax rules around environmental and labor rule enforcement, and other serious concerns for the faith community. Changes were hard-won, by congressional Democrats, union and consumer groups. After an internal political struggle to take up the USMCA, the Senate voted and passed the revised trade deal in early January of 2020. President Trump is set to sign the agreement into law on Wednesday of this week, sealing one of this topmost campaign promises.[1] Mexico and Canada are expected to ratify the agreement. On Mexico’s part, President Andrés Manuel López Obrador has been supportive.[2] The final sign-off will come from Canada’s parliament before the deal is fully ratified. Standard practice dictates that officials must spend the next few months working to meet all the necessary obligations outlined in the agreement before it can enter into force.[3]

For better or worse, the revised trade deal will define the landscape for bilateral trade between the United States, Mexico, and Canada for the near future, and ultimately, impact the wellbeing of the people that inhabit them. Appraising the deal, Public Citizen’s Lori Wallach explains, “Although the new deal still includes problematic terms, the alternative is status quo NAFTA, not a more improved deal.”[4] As much as the President would like to boast the agreement as the pinnacle of trade achievements, the reality is it will take a lifetime commitment from the triumvirate leaders of the United States, Mexico, and Canada, their industries, and officials, to work to expand the benevolent obligations of the agreement for effective change to come. Going forward, it will also take constant vigilance and strict observation of the principles of common good for a faithful and just trade arrangement to emerge.

Globally, unfair trade practices have exacerbated social and economic inequality by hitting the most vulnerable to swift changes the hardest. They are the underclass of workers displaced and poorer because of outsourcing in Ohio’s manufacturing industry and they are also the workers whose labor was exploited by wage suppression in Michoacán; they are the indigenous peoples of Canada whose land was uprooted by lucrative oil pursuits; and they are the countless others. In Mexico, the federal minimum amount a worker can expect to receive for their labor in one day is just $4.25. Despite Mexico’s efforts to ameliorate wage stagnation, it is simply not possible to do without taking into consideration the underpinning trade structure which enables corporate exploitation of so-called cheap labor.[5] Subsequently, of the three million Americans displaced from their jobs due to technology, trade, and policy choices, a majority have suffered a pay cut.[6] The USMCA finally earned the support of labor, consumer, and environmental groups once it began to address these unfathomable consequences.

Trade liberalization produces disproportionate losers and winners. Barring the intervention of governments, via fair trade policies and domestic federal policies that redistribute gains in the form of public sector goods, (or laws that curb corporate offshoring and outsourcing) the burden of the losses in trade settle mostly on the marginalized and poor. Striving towards a just traded arrangement means minimally accepting that the current system leaves out the neediest in favor of the wealthy.

Provisions in NAFTA, as other free trade agreements, have generally favored large corporations over the welfare of the people and environment. In ExxonMobil and Murphy Oil v. Canada, NAFTA’s Investor-State-Dispute Settle (ISDS) regime absolved a complaint brought up against the oil giants in violation of domestic law. The cases of exploitation against people and planet are too numerous to name.[7] Contrary to conventional theory, broad damages to people’s economic stability, the environment, and health caused by our trade policies outweigh the gains consumers get from cheaper imported products.

Rectifying the Ongoing Damage of NAFTA

Can the USMCA rectify the ongoing damage of NAFTA? The answer is complicated. Trade experts affirm that the USMCA is a floor, for a good trade agreement would require expansive changes. “[It] would additionally require climate provisions, stronger labor and environmental terms, and truly enforceable currency disciplines, and not limit consumer protections for food and product safety and labeling, the service sector, online platforms and more.”[8]

The Senate’s vote on USMCA highlighted this tension.[9] Nine Democratic senators voted against the agreement because it did not meaningfully address environmental and labor concerns. The sole Republican, Sen. Toomey (R-PA), voted against the deal on grounds that it would inhibit international trade.

Our Moral Duty as People On Trade

On trade, the Catholic Church is a firm proponent that treatises must respect human, civil, political, economic, social, cultural, and environmental rights at the individual, family and community levels, as well as the rights of nations and peoples.[10]

Compendium of the Social Doctrine of the Church teaches: “Today more than ever, international trade — if properly oriented — promotes development and can create new employment possibilities and provide useful resources.”   “[E]thical criteria … should form the basis of international economic relations: the pursuit of the common good and the universal destination of goods; equity in trade relationships; and attention to the rights and needs of the poor in policies concerning trade and international cooperation. Otherwise, ‘the poor nations remain ever poor while the rich ones become still richer'”(#364).

Trade is an extremely relevant topic when it comes to many polarizing issue areas, from migration, to wages and environmental stewardship—all issues we, as a people, care very much about. As a people, we have a moral duty to make the slow and arduous effort of pursuing the common good according to the principles the Catholic social justice.[11] Pope Francis put this best when he wrote: “We must pray for the conversion of people in business and politics that they will be truly moved by the suffering of those on the margins and lead us towards more just policies.” NETWORK will continue to monitor trade, and its connection and relevance to the world around us.

[1] “Senate passes USMCA, but much work remains.” Sabrina Rodriguez. POLITICO.

[2] “Los Negociadores Comerciales De Estados Unidos, Canadá Y México Firman El Acuerdo Modificado Del T-MEC.” CNN.

[3] “USCMA is Far From a Done Deal.” Sabrina Rodriguez, POLITICO.

[4] “NAFTA Vote Reveals New Reality for Trade Deals.” Lori Wallach. Public Citizen.

[5] “Mexico: The Importance of Minimum Wages in NAFTA Negotiations.” Leslie Palama and Carlos Vejar. Holland & Knight LLP.

[6] “How to Respond to Job Losses from Technology, Trade, and Policy Choices.” Andrew Stettner, The Century Foundation.

[7] “Case Studies: Investor-State Attacks on Public Interest Policies.” Public Citizen.

[8] “NAFTA Vote Reveals New Reality for Trade Deals.” Lori Wallach. Public Citizen.

[9] “Here Are The 10 Senators Who Voted Against Trump’s North American Trade Deal.” Sylvan Lane. The Hill.

[10] Pope John Paul II, Encyclical Sollicitudo rei socialis, 33.

[11] Evangelii Gaudiaum. Pope Francis.