Background

The U.S., Mexico, and Canada signed Dec. 10 a new version of a trade agreement updating the 25-year-old NAFTA that reflects a number of revisions agreed to in negotiations between the Trump administration and House Democrats. The House of Representatives could vote on the USMCA during the week of Dec. 16 but the timing of a Senate vote is less clear.

For more information, please contact trade consultant Nicole Bivens Collinson at (202) 730-4956. In addition, ST&R will be posting soon on its web site a series of webinars on the USMCA. These will include a Jan. 7 webinar on the timing and possible implementation of the agreement, a Jan. 8 webinar offering a general overview, and subsequent sessions offering more detail on automotive, apparel, steel and aluminum, and other provisions.

The USMCA announced in September 2018 included updated provisions on agriculture, automobiles, textiles and apparel, rules of origin, information and communications technology, intellectual property rights, low-value shipments, digital trade, currency, and other issues. According to information from House Ways and Means Committee Chairman Richard Neal, D-Mass., that agreement has been further amended as follows.

Enforcement

- removes language allowing a responding party to block the formation of a dispute settlement panel

- creates rules of evidence for the first time in a trade agreement

Labor

- removes language making it difficult to prove that trading partners are failing to keep commitments to protect workers from violence

- creates a presumption that labor violations affect trade

- removes language that had made the forced labor provision “effectively unenforceable”

- adds mechanisms and resources to monitor Mexico’s compliance with its obligations on labor, including an interagency committee to monitor compliance, regular reports to Congress, enforcement action if benchmarks for labor reform implementation are not met, and new labor attach├ęs in Mexico

- adds a labor-specific enforcement mechanism that provides for facility-based enforcement of labor obligations, covers all manufactured goods and all services traded between the U.S. and Mexico, requires verification of compliance by independent labor experts, and leads to penalties on noncompliant goods and services

Environment

- adds a presumption that environmental violations affect trade and investment and a commitment that all three countries will adopt, implement, and maintain seven multilateral environment agreements

- establishes new mechanisms and resources to monitor compliance with environmental provisions, including an interagency committee to monitor implementation and recommend enforcement actions and environment-focused attach├ęs in Mexico City

- creates a new customs verification mechanism to ensure that only legally harvested and taken flora and fauna are traded through Mexico

- provides additional funds to the Trade Enforcement Trust Fund to be used for environment-focused enforcement efforts

Pharmaceuticals

- removes provisions that required (a) at least 10 years of exclusivity for biologic drugs, (b) confirmation that patents would be available for new uses of known products, and (c) three additional years of exclusivity for clinical information submitted in connection with new uses of previously-approved pharmaceutical products

- clarifies the circumstances in which generic and biosimilar companies may use a patented invention so they can obtain marketing approval on day one of patent expiration

- revises the data protection provision to incorporate limitations in U.S. law that foster generic competition

Nicole Bivens Collinson, who leads the government relations practice for Sandler, Travis & Rosenberg, P.A., said congressional staffers are working to craft implementing legislation that reflects the USMCA revisions, which could be finalized by the end of the week. That bill will be considered by Ways and Means and then sent to the House floor, where a vote could take place the week of Dec. 16. It is generally anticipated that the bill will pass the Democrat-controlled House with more Democrat support than previously expected, particularly after the AFL-CIO’s unprecedented endorsement of the USMCA this week.

The measure will then go the Senate, where prospects for action in the Finance Committee and on the Senate floor are less clear. The Republican-controlled Senate could approve the bill before the holiday recess slated to begin Dec. 20, which Collinson said would allow senators to highlight the agreement’s anticipated benefits when they return to their states. On the other hand, Republican leaders could elect to delay a vote until January given that some of the revised provisions in the agreement may be objectionable to party constituents.

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