Midterm election results could put the USMCA in jeopardy, which isn’t good for Canada: experts

Click to play video: 'U of S prof Greg Poelzer on the impact of the U.S. midterms'
U of S prof Greg Poelzer on the impact of the U.S. midterms
WATCH: University of Saskatchewan (U of S) prof Greg Poelzer talks about the impact of the U.S. midterm elections on Canada and the province – Nov 5, 2018

The results of the U.S. Midterm elections on Nov. 6 could threaten trade between Canada and the United States, experts suggest.

The outcome could affect “everything from our agricultural products to the USMCA, the new trade agreement that replaced NAFTA, to issues like steel and aluminum tariffs,” University of Saskatchewan political science professor Greg Poelzer told Global News.

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When it comes to trade, “the shape of the Congress, both the Senate and the House of Representatives, matter a lot,” he said.

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Recent polls suggest Democrats are likely to take the House of Representatives while Republicans are projected to hang on to the Senate.

In this outcome, the United States Mexico Canada Agreement (USMCA), the renegotiated North American Free Trade Agreement (NAFTA) that was finalized last month, could fall victim to partisan politics.

“The real issue will be whether or not they’ll be in refusal mode and will just want to stick it to Trump in every possible way they can, or if this is actually something that a few Democrats may actually want to get behind,” said Greg Anderson, an associate professor of political science at the University of Ottawa.

He said Congress needs to pass legislation to implement a new trade deal, a process which may be delayed or halted, depending on the extent of Democratic resolve.

“It just depends on how ugly the Democrats want to be about saying no to almost everything that Trump does.”

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This legislation is slated to be passed in the new year, under the new Congressional makeup.

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Robert Wolfe, a former professor at Queen’s University and expert on trade policy, agrees that a Democratic House introduces the possibility of newly powerful Democratic representatives voting against ratifying the USMCA due to their resentment of the current president.

“The fact that the deal was signed by Trump means they’re really going to be reluctant to agree to the deal. So it’s just going to be that much harder to get this new agreement through Congress,” he said.

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According to Bloomberg, Democrats are already making demands to secure their support for the deal. On Monday, Michigan Rep. Sander Levin said that Mexico would need to update its labour laws to increase wages before Congress votes on the new trade deal.

Rep. Richard Neal, the top Democrat on the house Ways and Means committee who’s in line to become the next chairman if his party takes control, has also expressed concerns to the press.

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He told reporters Sunday night that “the bar for supporting the new NAFTA will be high.” Neal, who represents New Jersey, has also said that he’d be looking at “the enforcement and enforceability of the agreement’s provisions.”

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In addition, Democrat Ron Wyden of Oregon has stated that changes may be needed to the dispute settlement procedures in Chapter 11 to serve as an enforcement mechanism in the deal before it can be approved. Wyden is the top ranking Democrat on the Senate Finance Committee and is set to take over leadership of the panel should his party claim the Senate on Nov. 6.

“The last thing that is needed right now, at a time of great public frustration with what’s going on with Washington, is ramming this through,” Wyden said.

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Even forcing the deal back to the negotiating table would further delay its implementation because of the recent election of a new administration in Mexico — a delay which Wolfe maintains is not in Canada’s best interests.

“That’s a problem because Mexico has a new government. Their small trade team was paying attention very closely to the final aspects of the negotiations, but it is not their deal,” Wolfe said.

To renegotiate the USMCA, Mexico’s new leadership would have to “get up to speed and then start renegotiating. That would be a very long process.”

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Mexico’s new government is headed by Andrés Manuel López Obrador, who has been known to argue against free-market policies. While he’s expressed his support for the USMCA, he held deep misgivings about NAFTA.

Wolfe notes, however, the trade deal may be impacted by the election even if the GOP hangs on to a House majority on Tuesday because of the over 40 Republicans not seeking re-election.

“I think it’s probably safer to say that the election will have an impact on the trade deal, anyway. There are 43 Republicans who aren’t running again. Even if the Republicans maintain the majority, it will be a different Republican group,” he adds.

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Despite having made some concessions in the deal in areas such as dairy and intellectual property, Wolfe said Canada stands to lose a lot if the USMCA is eventually abandoned because contention between the U.S. House and Senate prevents the deal from being ratified by Congress.

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“From Canada’s standpoint, it’s all messy, none of it’s good, but the best option would be to get this deal through Congress.”

James Brander, a Canadian economist and professor at the University of British Columbia, notes that there may be a benefit to a Democratic House majority, particularly if the president unilaterally decides to withdraw from the USMCA.

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“The House of Representatives does have some input. There are a lot of legal grey areas. If Trump had wanted to withdraw from NAFTA, there is a question as to whether he could legally do so without agreement from both the House and the Senate,” Brander said.

“It will certainly help Canada to have a Democratic House, if that’s what happens.”

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Rep. Wyden has suggested that any attempt by Trump to pull out of the USMCA could be met with a hard stop in Democratic House.

“The president needs to take a look at the Constitution — it gives Congress authority over trade,” he said in a statement to Politico after the deal was agreed upon last month. “The president cannot pull America out of NAFTA without Congress’ permission.”

Final polls from Politico and FiveThirtyEight indicate that the Democrats maintain an advantage in the House while the GOP will likely hang on to the Senate.

In most states, polls opened at 7 a.m. local time and close at around 8 p.m. local time.

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