U.S. Vote on the New NAFTA Could Slip to Late 2020, Says Grassley

The Sino-U.S.trade war has pushed the new NAFTA, a pact that Canada, Mexico, and the U.S. back with varying degrees of enthusiasm, into the shadows on Capitol Hill. Senate Finance Chairman Charles Grassley said on Tuesday that a vote on the free trade agreement could be delayed for a year or more by presidential politicking unless Congress starts work soon.

"If we don't get it done this year, it won't get done until after the next presidential election," said Grassley. During a teleconference, he pointed to "selfish banking lobbyists" as an obstacle to the United States-Mexico-Canada Agreement. The USMCA faces other hurdles, too. Chief among them is a tri-national fight over steel and aluminum tariffs and demands by House Democrats for stronger language on labor and environmental protections. The White House has yet to send the USMCA to Congress for consideration.

Grassley discussed the prospects for USMCA at the same time the Trump administration was working on an aid package for U.S. farmers caught in the tariff cross fire of the trade war. USDA officials told farm broadcasters that a trade mitigation plan is days, not weeks, away. A key member of the Senate Appropriations Committee, John Hoeven of North Dakota, said, "We worked to provide the authority necessary to use tariff revenue to provide agriculture aid." Twice, President Trump has said $15 billion in tariff revenue could be used to prop up the farm sector.

At the White House, Trump said, "We're having a little squabble with China" and responded to a question about the trade war by saying, "I think we're winning it." Meanwhile, a senior administration official says the differences between the countries are so deeply rooted, a resolution was unlikely before the end of this year, reported Axios.

A $15 billion package would be more than 50% larger than the roughly $9.7 billion the USDA is spending on the three-part plan announced last July to mitigate the impact of retaliatory Chinese tariffs. Some $8.3 billion of it was cash payments to producers of nine commodities.

U.S. passage of the USMCA "is critical to the credibility of our trade agenda," said Grassley, who would guide Senate action on the pact. Under the Constitution, all tax bills must originate in the House, and the USMCA would alter tariff laws, so the House will make the first move. "When the president leads, then we can concentrate on the House of Representatives," said Grassley, to remove opposition to the pact.

The USMCA would preserve duty-free access for most U.S. food and ag exports to Canada and Mexico, achieved in NAFTA, and bring modest gains for wheat and dairy exports.

"The president has to lift those tariffs," said Grassley, referring to U.S. tariffs on steel and aluminum imported from Canada and Mexico. The two nations have indicated they will not act on the USMCA so long as the tariffs are in effect. They oppose administration suggestions to convert the tariffs into import quotas. Some U.S. lawmakers say they will not vote for USMCA unless the tariffs are removed.

Christopher Sands of the Center on Strategic and International Studies is among analysts who say congressional deliberations will consume months, notwithstanding the so-called fast-track law that guarantees a yes-or-no vote with no amendments allowed. The U.S. demanded an update of NAFTA, so the other nations expect it to act first.

Work on USMCA is likely to freeze during the election season, which will start soon in Canada, which has scheduled federal elections for October 21. The Iowa precinct caucuses on February 3 will open the race for the U.S. presidential nominations.

Aside from the USMCA, the administration is working on trade agreements with Japan, the EU, and China. Agriculture is a key issue in each of the negotiations.

"There is a lot of angst, a lot of uncertainty," said former agriculture secretary Tom Vilsack, describing the mood in rural America. Everyone "would benefit if we had a trade win somewhere" soon.

Trump was "absolutely correct" in confronting China over its predatory trade practices, but it is "very tough to negotiate" alone against a stubborn adversary, said Vilsack.