USMCA looms over Biden summit with leaders from Mexico, Canada

USMCA looms over Biden summit with leaders from Mexico, Canada

Former President Trump in 2020 promised that his newly-minted trade agreement with Canada and Mexico would pour cash and jobs in the U.S. But 16 months later, the double whammy of COVID-19 and supply chain chaos has blunted its impact.

The landmark deal, known as the U.S.-Mexico-Canada Agreement, or USMCA, was expected to add more than $67 billion to the U.S. Gross Domestic Product and create 176,000 new jobs. The pact, however, went into effect on July 1, 2020, one of the deadliest months of the COVID-19 pandemic.

As the three countries began to emerge from a pandemic, the supply chain crisis hit, disrupting global trade.

The future of the USMCA will be among the topics discussed when President Biden meets with the leaders of Mexico and Canada on Thursday.

The economic turmoil has made it difficult to assess if the USMCA is a win for its participants. And experts say it’s still unclear how everything will shake out and if the deal is as significant in the post-COVID-19 world.

“We lost the first year because of COVID so it’s really hard to put the perspective on USMCA that would normally occur because of the economic dislocation caused by COVID,” said Rick Manning, president of Americans for Limited Government, a conservative group that advocated for the USMCA.

Mr. Biden isn’t expected to make any changes or tweak the deal, which earned overwhelming support from Democrats and was popular among labor leaders. The AFL-CIO, one of Mr. Biden’s biggest backers, supported the USMCA, saying it would keep jobs in the U.S.

Thursday’s meeting will be the first White House summit for the three leaders since 2016. Mr. Trump famously ditched the meetings, which began in 2005.

Instead, Mr. Trump forced Canada and Mexico to the negotiating table to rewrite the previous three-way pact, the North American Free Trade Agreement, which had proven least beneficial for the U.S.

On Thursday, Canada and Mexico are expected to press Mr. Biden about his proposed tax credit for American-made electric vehicles, which could take a bite out the auto-assembly business across the border. The tax credit is part of Mr. Biden’s ambitious $1.75 trillion social welfare and climate bill.

Both Canada and Mexico say the proposal gives an unfair advantage to U.S. manufacturers. It also runs afoul of the integrated manufacturing process that exists between the three countries.

The impact of COVID-19 on the USMCA extends beyond just business shutdowns that have slowed trade. It has also made it difficult to measure the impact of the agreement’s novel wage requirements in the auto industry.

Under the USMCA, 40% of a car must be manufactured in a plant where workers make at least $16 an hour to avoid U.S. import tariffs. The move was expected to raise wages for Mexican workers, who pull down the lowest wages among the three nations.

COVID-19 stalled hiring in Mexico, preventing workers from fully realizing the benefit.

“COVID-19 has also introduced a number of issues surrounding the treatment of workers, particularly migrant workers in the United States and organizing efforts and collective action in both countries, exacerbating some of the tensions,” said Desiree LeClercq, a professor of labor law at Cornell University.