Senate Finance Committee Hearing on the USMCA

Senate Finance Committee

“Open Executive Session to Consider H.R. 5430, The United States-Mexico-Canada Agreement Implementation Act”

Tuesday, January 7, 2020


Bill Considered

Opening Statements

Chairman Chuck Grassley (R-Iowa)

In his opening statement, Grassley stated that the markup, under fast track rules, would only allow members of the committee to vote on, not offer amendments to, the United States-Mexico-Canada Agreement (USMCA). Grassley highlighted that President Trump delivered on his promise for a widely supported, strong and updated trade agreement. He said that he is confident the President will sign the bill Congress sends to him, given that it will provide farmers, workers, and businesses reliable market access, wage increases and certainty. Grassley continued that the USMCA corrects enforcement flaws from previous trade deals, holding parties accountable to their commitments. He urged the committee to vote favorably on the bill, although aspects of the bill could be improved.

Ranking Member Ron Wyden (D-Ore.)

In his opening statement, Wyden echoed his support for the USMCA. He expressed that the Trump administration has continuously delivered multiple trade “gut punches” to farmers and manufacturers, including threats of the U.S. pulling out of the North American Free Trade Agreement (NAFTA) and tariffs. Wyden emphasized the labor enforcement provisions in the agreement, stating that he, Sen. Sherrod Brown (D-Ohio) and others coordinated efforts to prevent Mexico from violating labor laws. He added support for the USMCA digital and technology chapter, stating that there is more work to be done to set the rules of the road.

H.R. 5420, the United States-Mexico-Canada Agreement Implementation Act

Myer Patel, United States Trade Representative (USTR), discussed the bill, saying it would repeal NAFTA and create a smooth transition for implementation of the USMCA. He highlighted that the bill includes nine chapters: 1) approval of and general USMCA provisions; 2) customs provisions; 3) application to sectors and services; 4) anti-dumping and countervailing duties; 5) transfer provisions and other amendments; 6) transition to USMCA and extension; 7) labor monitoring and enforcement; 8) environment monitoring and enforcement; and 9) the USMCA Supplemental Appropriations Act of 2019.

All Senators of the committee, apart from Sens. Pat Toomey (R-Pa.), Bill Cassidy (R-La.), and Sheldon Whitehouse (D-R.I.), spoke in support of the USMCA.

Sens. Mike Crapo (R-Idaho), John Thune (R-S.D.) and John Cornyn (R-Texas) highlighted the economic benefits from the agreement amounting to an increase in real U.S. gross domestic product (GDP), wages and jobs. Sens. Rob Portman (R-Ohio) and Tim Scott (R-S.C.) emphasized the importance of the deal for the automotive industry. Other Republican Senators including Pat Roberts (R-Kan.), Steve Daines (R-Mont.), Ben Sasse (R-Neb.) and Todd Young (R-Ind.) spoke about the positives of the agreement for the agriculture sector. Sen. James Lankford (R-Okla.) added that the agreement would work to achieve the President’s low to no tariff goals and would hopefully set a foundation for future trade agreements. Portman, along with Sen. Tom Carper (D-Del.), highlighted the strong environmental and labor provisions in the agreement.

Brown and many Democrats including Sens. Michael Bennet (D-Colo.), Debbie Stabenow (D-Mich.), Maria Cantwell (D-Wash.), Catherine Cortez Masto (D-Nev.), Maggie Hassan (D-N.H.), and Bob Casey (D-Pa.) expressed their support for the enforceable labor provisions, acknowledging the efforts made by Wyden and Brown. Brown stated that solely because of these provisions, this is the only trade agreement he would be voting for to date. Hassan highlighted that the provisions would level the playing field for workers in her state and help cut the red tape. Sen. Bob Menendez (D-N.J.) added that there is further work for the USTR to complete regarding enforcement and transparency, saying he intends to introduce legislation to require the creation of the inspector general role at USTR. Sens. Mark Warner (D-Va.) and Bennet opined that trade uncertainty will remain as long as the President’s actions are counterproductive, such as the implementation of tariffs. Warner said he has been working with Toomey to prevent the abusive use of tariffs.

Sens. Toomey and Cassidy said that they have been frustrated with the process of reaching this agreement. Toomey said the agreement diminishes trade and investment opportunities, taking the U.S. backward. He added that harmful provisions include language about the rules of origin, the sunset clause, the investor-state dispute settlement (ISDS), intellectual property (IP), and labor. Cassidy echoed his concerns about the ISDS language. Toomey expressed that this agreement should not be considered under trade promotion authority (TPA) rules.

Whitehouse expressed concerns that the agreement does not address environmental issues, although he commended Sens. Ben Cardin (D-Md.) and Carper’s efforts.

Question and Answer

Toomey asked when the complete text was sent to Congress. John Melle, USTR, answered that it was sent on May 30, 2019. Toomey expressed frustration with the implementation process and timing. He offered an amendment that would extend USMCA for an additional six years following the sixteen-year sunset language. Grassley ruled him out of order, and Toomey did not appeal.

Menendez asked about the potential role of an inspector general at USTR. Greta Peisch, Senate Finance Minority Committee Staff, answered that an inspector general would be able to review enforcement compliance, procedure and audits.

Brown asked about Brown-Wyden labor provisions enforcement timing and actions. Peisch said that enforcement violations would take approximately 150 days to prosecute, which is significantly shorter than state-to-state enforcement. She added that the U.S. could impose tariffs, apply penalties, and suspend liquidation for violators of such labor provisions. Peisch said that these are the strongest labor enforcement provisions in a trade agreement to date.

Portman asked about digital trade, specifically related to the Trans-Pacific Partnership (TPP). Melle said the agreement modernizes digital disciplines further than prior agreements, especially TPP.

Portman asked about auto production requirements for rules of origin. Melle stated USMCA requires 75 percent of an automotive vehicle to contain parts made in the U.S. He added that there is an expectation of billions of dollars’ worth of investment in the U.S. to encourage further innovation in this sector.

Lankford asked for additional clarification on IP language and U.S obligations in the agreement. Melle said there are several improvements, such as minimum rights for copyrights, authority for border enforcement officials to stop pirated goods at the border, protections for trade secrets, and other civil and criminal provisions. He added that the agreement does not add additional obligations to the referenced seven treaties in the USMCA.

The measure was reported favorably to the Senate by a vote of 25-3.

The legislation will also be considered in the Senate Committees on Health, Education, Labor and Pensions; Environment and Public Works; Appropriations; Foreign Relations; Commerce, Science and Transportation; and Budget.

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