Topline: Even as presidential impeachment talks are ongoing, Congressional Democrats and the Trump administration are reportedly close to finalizing a revised North American trade deal to replace NAFTA, after more than a year of negotiations.
- Voting to ratify the new United States-Mexico-Canada Agreement (USMCA), the so-called NAFTA 2.0, could start in the Democratic-held House of Representatives as early as December 18, according to a report from CNBC.
- While the Trump administration reached an agreement with Canada and Mexico for a revised trade deal in 2018, it still requires congressional approval: Democrats have spent months pressing for better labor and environmental protections, as well as advocating against a pharmaceutical provision that they argue hurts consumers.
- House Speaker Nancy Pelosi and other Democrats have been working with labor unions, such as the AFL-CIO, who have urged for tougher labor rules to protect American workers, according to the Washington Post.
- Approval of the USMCA would likely boost Trump’s reelection bid in 2020 and constitute his biggest trade win to date, according to the New York Times, since it follows up on his 2016 campaign promise to rip up NAFTA.
- The terms of the new USMCA deal are yet to be announced, and it remains to be seen how much of it has changed from the original 2,000-page-plus agreement signed last year. Canada and Mexico will both need to approve the revised agreement within their respective legislatures as well.
- “A lot of strides over the last 24 hours” Trump told reporters on Monday. “If they put it up for a vote, it’ll pass.”
Crucial quotes: “It makes sense for both sides to get some kind of a deal done,” says Wilmington Trust chief economist Luke Tilley. “The downside risk for markets is if the deal completely falls apart, in which case NAFTA would stay in place.”
“Both sides of the aisle are hopeful that this deal will get done even as the President is going through impeachment proceedings,” says Edward Moya, senior market analyst at Oanda. “It will remove a key market uncertainty.”
What to watch for: The Trump administration has repeatedly urged House Democrats to vote on the new USMCA deal before the end of the year, in part to avoid pressures from the impeachment process and upcoming 2020 election. If labor groups like the AFL-CIO, which reportedly met on Monday to discuss the near-finalized agreement, decide to support the deal, that will likely ensure adequate legislative support from Democrats. With the House moving closer to voting on articles of impeachment, both Republicans and Democrats are hoping to pass the deal before the year’s end, according to the Washington Post. Mexico has ratified a version of the agreement already, while Canada is waiting to see how deliberations in the U.S play out before it does so as well, CNBC reported.