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Former U.S. ambassador to Canada: USMCA deal is a rare 'win, win, win'

Adriana Belmonte
Associate Editor

House Democrats announced on Tuesday that it would support the passage of the United States-Mexico-Canada Agreement (USMCA) after the deal spent months in limbo.

And while details of the official deal are scarce, House Speaker Nancy Pelosi described the deal to replace North American Free Trade Agreement (NAFTA) as a “victory for American workers.”

Bruce Heyman, the former U.S. ambassador to Canada from 2014 to 2017, went even further.

“It’s one of those rare circumstances we’ve seen now for the last few years, where you have a win-win-win,” Heyman said on Yahoo Finance’s On the Move. “You have a win for not only the administration, but also Congress. You have a win for American workers, farmers, and the environment. You have a win for Canada and Mexico. And so altogether, I think that this should be a day to celebrate our trading relationship.”

He added that while his preference was that the aborted Trans-Pacific Partnership (TPP) would have served as the replacement to NAFTA, the new deal will have a similar effect.

“Lo and behold, the president said the TPP was bad and NAFTA was bad,” Heyman said. “But what did we get? 65% to 70% of the exact language in this new USMCA is TPP. They lifted it right out of TPP. The rest is pretty much the structure of NAFTA with the exception of these auto provisions that were put in.”

U.S. President Donald Trump, Speaker Nancy Pelosi and Vice President Mike Pence applaud during the State of the Union address in the chamber of the U.S. House of Representatives at the U.S. Capitol Building on February 5, 2019 in Washington, DC. (Photo: Doug Mills-Pool/Getty Images)

‘The auto industry is facing a whole cyclical change’

On the U.S. side, the USMCA is said to provide an economic boon to the automaker industry. The American Automotive Policy Council stated that the USMCA will incentivize a $23 billion increase in U.S. annual parts and sales alone. The deal will also reportedly raise wages in Mexico.

“The auto industry is facing a whole cyclical change that is taking place after an 11-year recovery, and now moving into a whole different cycle of people’s usage of automobiles and the types of automobiles that they use,” Heyman said. “So I think it’s a bit tricky. The administration, though, definitely came in with the aim of protecting American jobs and workers. The biggest pluses that we had at the early years of NAFTA came from plants moving to Mexico at these lower labor rates.” 

According to the Wall Street Journal, the USMCA will require that “a certain proportion of a car will have to be produced by workers with higher wages, and a greater proportion of components will have to originate in North America.” The production stems from Mexican workers, who will reportedly have less restrictions on forming unions and demanding fair pay. 

President Donald Trump, center, reaches out to Mexico's President Enrique Pena Nieto, left, and Canada's Prime Minister Justin Trudeau as they prepare to sign a new United States-Mexico-Canada Agreement that is replacing the NAFTA trade deal, during a ceremony at a hotel before the start of the G20 summit in Buenos Aires, Argentina, Friday, Nov. 30, 2018. (AP Photo/Martin Mejia)

“By increasing the hourly wage on content on American automobiles and increasing North American content of steel and aluminum and parts, it just enhances the ability for North America to compete more effectively,” Heyman said. “That all being said, the auto industry is facing so many other challenges here that might get mixed up in today’s news.” 

Heyman also highlighted the environmental provisions and prescription drug changes that come with the USMCA. 

“You also have environmental enforcement provisions that are put in, which is forcing all three countries to maintain and support environmental standards,” he said. “And you have these prescription drug changes that the administration tried to put in an expansion of the patent life for a lot of the drug companies. And we’re trying to lower costs for Americans and others for health care. Doing that really ties the hands of Congress, so that was removed. We really have a good outcome of taking TPP, some of NAFTA, and then putting more enforcement in.”

There is one aspect, though, that may allow the USMCA to go a long way — the fact that it’s no longer called NAFTA.

“The word ‘NAFTA’ became so toxic politically that it’s now been replaced with USMCA,” Heyman said. “Albeit the trade agreement isn’t so significantly different from NAFTA, I think optically it will appear much better.” 

Adriana is an associate editor for Yahoo Finance. She can be reached at adriana@yahoofinance.com. Follow her on Twitter @adrianambells.

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