Tariffs, Drug Prices, Enforcement Could Hold Up USMCA
Observers said this week that failure to resolve issues such as steel and aluminum tariffs, drug prices, and enforcement could pose challenges to implementation of the U.S.-Mexico-Canada Trade Agreement, which was signed last November.
Senate Finance Committee Chairman Charles Grassley, R-Iowa, reiterated that the Trump administration’s continued imposition of national security-related tariffs on steel and aluminum from Canada and Mexico will be a hurdle for the USMCA. “The Senate in Mexico is not going to take [the agreement] up until the tariffs are off and the House of Commons in Canada is not going to take it up if [the agreement] is not there soon after March 1 and it’s not going to be there unless the tariffs are off," Grassley was quoted as saying in a Roll Call article. Grassley’s comments add to mounting pressure on the White House to eliminate the tariffs.
Another problematic issue is pharmaceuticals. The USMCA would “give pharmaceutical companies 10 years’ protection from cheaper competition in a category of ultra-expensive drugs called biologics, which are made from living cells,” the Associated Press reports. That could allow drug makers to “charge exorbitant prices” for biologics, although others argue that “the pact might cut prices in the United States because drug companies would no longer face pressure to charge Americans more to compensate for lower prices in Canada and Mexico.” However, the article states, with Democrats in control of the House of Representatives and lower drug prices a “rallying cry for voters of all political stripes,” it could be difficult to secure congressional approval of legislation implementing the USMCA without amending or perhaps removing this provision.
Finally, some congressional Democrats are continuing to push for stronger enforcement of the agreement’s labor and environmental protections. According to an article in The Hill, Sen. Sherrod Brown, D-Ohio, said the USMCA in its current form “just simply isn’t good enough for most Democrats” because “it’s not good enough for organized labor, it doesn’t work for workers.” A Wall Street Journal article explains that while many lawmakers favor using international arbitration panels or other means to enforce trade agreements, the Trump administration opposes such methods over concerns that they could “undermine U.S. sovereignty.” Grassley said enforcement concerns could be addressed in side letters to the agreement but that Canadian and Mexican officials recently told him that “there is not going to be any reopening of negotiations.”
In related news, the International Trade Commission has pushed back to mid-April the deadline for issuing its report on the likely economic impact of the USMCA. Legislation to implement the agreement will not be introduced in Congress until that report is submitted.