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Nancy Pelosi, White House have tentative deal on new NAFTA, insiders say 

The Trump administration and House Democrats have a tentative deal on the U.S.-Mexico-Canada trade agreement, according to people familiar with negotiations, paving the way for congressional approval as early as this month even as Democrats prepare to impeach the president.

Speaker Nancy Pelosi is reviewing changes to the agreement that U.S. Trade Representative Robert Lighthizer and his Mexican counterpart Jesus Seade have put on paper over the past week.

The revision of the North American Free Trade Agreement is one of President Donald Trump’s top priorities, and its passage would help the White House make the case that he’s pursuing policy achievements on behalf of the country even while lawmakers debate removing him from office.

At the same time, a deal would show that Democrats can legislate while also investigating the president’s administration.

“I’m hearing a lot of strides have been made over the last 24 hours with unions and with others,” Trump told reporters on Monday. “I’m hearing very good things. I’m hearing from unions and others that it’s looking good, and I hope they put it up to a vote.”

Lighthizer and Seade exchanged proposals on labor inspection rules and tougher steel provisions and finished a compromise package late Friday that they submitted to Pelosi, the people said. A demand from the U.S. regarding steel and aluminum, which people briefed on the talks said came from the United Steelworkers union, threatened to stall the negotiations last week.

In a change of plans Monday, Seade stayed in Mexico rather than returning to Washington to meet with Lighthizer again, according to three people familiar with his plans.

Mexican President Andres Manuel Lopez Obrador said earlier Monday that he expects a decision from the U.S. on the agreement very soon.

“Now is the time to vote on it,” Lopez Obrador said Monday. “I am optimistic we can reach a deal.”

Seeking Approval

Seade and Foreign Minister Marcelo Ebrard plan to update reporters on advances in the negotiations later on Monday, the ministry said.

While all parties are still reviewing the deal, representatives from the three countries are already discussing where to have a signing ceremony, according to one person familiar with the matter.

U.S. labour groups and House Democrats will need to agree to the final details, in addition to the leaders of the three countries, another person said. If the AFL-CIO, the biggest labour federation in the U.S., is on board with the deal, it could make it easier for the Democratic-led House to expedite the process and vote as soon as next week, according to a different person briefed on the negotiations.

AFL-CIO President Richard Trumka spoke with Trump before Trumka briefed the labor group’s executive committee meeting at 2 p.m., according to two other people familiar with the matter.

The peso extended a five-day climb after news of a potential deal, rising 0.5 per cent to become the second best-performing currency in emerging markets on the day.

Pelosi last month cautioned that even with a deal, there might not be enough time to vote on the agreement this year, reminding her members that “in a world of instant gratification,” legislating takes time.

There are still a number of procedural hurdles before the agreement can come to the floor for a vote, including committee hearings and review of the implementing bill in the House Ways and Means and Senate Finance committees. Those steps could be waived to save time, though, and people familiar with the talks said lawmakers are likely to skip some of them.

Political Pressure

Democrats from rural, swing districts are especially eager to get a deal done. Farmers have faced devastating economic losses this year because of the trade war with China, although the president has blamed some of that on the delay in getting the USMCA approved.

The U.S. International Trade Commission, an independent government panel, in an April analysis said USMCA would boost the U.S. economy by 0.35 per cent and lead to 176,000 new jobs in the sixth year after implementation, a small addition to the 132 million people employed full-time in the U.S.

Leaders of Canada, Mexico and the U.S. signed the agreement more than a year ago and the White House and Democrats have spent months locked in tense negotiations over four key areas: environment, labour commitments, drug-patent protections and enforcement mechanisms. In recent weeks, the discussions have focused on the deal’s labour enforcement.

One of the main sticking points was a Democratic proposal to enforce labor rights by allowing products from factories accused of violations to be inspected and blocked at the U.S. border. California Representative Jimmy Gomez, a member of House Democratic negotiating team, said last week that Pelosi and Lighthizer have offered Mexico a compromise on labor enforcement that “respects Mexico’s sovereignty.”

Republicans and the business community increased pressure on Pelosi as they grew concerned that time was running out for a vote in 2019, believing it would be difficult to hold a vote in an election year. Pelosi said she wouldn’t rule out a vote in 2020, although she said her preference would be to get it done sooner.

The president has become increasingly frustrated that his deal has stalled and expressed pessimism about the chances Congress would ever take it up for a vote.

“Hard to believe, but if Nancy Pelosi had put our great Trade Deal with Mexico and Canada, USMCA, up for a vote long ago, our economy would be even better,” Trump said in a tweet on Saturday. “If she doesn’t move quickly, it will collapse!”

Labour Role

Key to reaching a deal has been neutralizing any opposition from the largest U.S. union confederation, the AFL-CIO.

Trump and his advisers tout USMCA as the best agreement ever negotiated for unions and Democrats, particularly the deal’s labor provisions and stricter auto-content rules that they say would boost U.S. manufacturing.

Trumka urged Democrats in a November meeting not to rush into an agreement without strong enforcement procedures and said they should hold out for more concessions.

The labour leader told The Washington Post on Monday that he is reviewing the deal.

–With assistance from Justin Sink.

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USMCA: Ratification is getting there but ‘difficult issues’ remain

The push to ratify a new North American trade pact is “getting there” Mexico’s top negotiator says, though some “difficult issues” remain as U.S. Democrats continue to insist on stronger labour enforcement.

Jesús Seade, Mexican Undersecretary for North America, met with Prime Minister Justin Trudeau and Deputy Prime Minister Chrystia Freeland in Ottawa Friday, as the political window to approve the trilateral pact this year slowly closes.

The Trump administration has spent months negotiating changes designed to woo skeptical Democrats even as a series of obstacles — including a government shutdown, an investigation into Russian interference in the 2016 election and an ongoing impeachment inquiry — threatened to derail the process.

United States Trade Representative Robert Lighthizer must satisfy Democrat concerns while holding on to the support of Mexico and Canada, as well as Senate Republicans.

“If the amendments suggested are fine, are acceptable, are improvements, then there’s no reason why we should not be shaking hands next week,” Seade told reporters at the Mexican Embassy.

Seade’s comments followed those of Trudeau, who told reporters that there was “a little more work to do,” on the trilateral pact.

“Canada is extremely supportive of Mexico’s steps toward labour reforms,” he said.

The Ottawa talks followed a flurry of high-level meetings in Washington earlier in the week involving Seade, Freeland and Lighthizer.

The $1 trillion North American Free trade pact — dubbed the U.S.- Mexico-Canada Agreement, or USMCA, by U.S. President Donald Trump — was signed by leaders in Buenos Aires last fall. However, it still requires ratification by all three countries before it can take effect. Mexico has already ratified the deal. Canada has been waiting for it to be approved in the U.S, where the Democrats controlling Congress have insisted on changes to pharmaceutical provisions and tougher enforcement of Mexican labour reforms.

The question of just how to enforce those reforms has yet to be answered. So far, Mexico has resisted a push by Democrats to allow U.S. officials to inspect Mexican workplaces in order to ensure compliance.

In general, my sentiment is that this is going to be an improvement, but there are some difficult issues I have to discuss with stakeholders in Mexico.

Jesús Seade, Mexico’s NAFTA negotiator

The proposal to allow U.S. inspectors is “no longer a red line but an engraving on the floor” for Mexico, Seade said Friday.

“We would not accept these lone ranger inspectors being called and 12 hours later they dash to see a factory. That’s not fun.”

Still Seade believes something will be signed soon that is an overall improvement.

“So, this is a major achievement,” he said. “In general, my sentiment is that this is going to be an improvement, but there are some difficult issues I have to discuss with stakeholders in Mexico. But we are getting there.”

Despite the optimistic tones and the final push to approve it, the path to ratification for the pact remains far from certain, analysts warn.

Indeed, since negotiations between Lighthizer and House Democrats have taken place under confidentiality agreements, “we don’t really know what they’ve agreed to,” said Dan Uzcjo, an Ohio-based trade lawyer with Dickinson Wright. That will become clear only when an implementing bill is written and presented to Congress for consideration.

“Everyone might say this is a done deal. It’s not,” Uzcjo said. “There’s a lot more work to do in December and January. The implementing bill is where the fight begins and going through that will take up until Christmas, perhaps longer.”

Everyone might say this is a done deal. It’s not. There’s a lot more work to do in December and January.

Dan Uzcjo, trade lawyer, Dickinson Wright

Democrats, for instance, are pushing to shorten patent protection for a class of drugs known as biologics to eight years from 10. Those changes could anger the pharmaceutical lobby, he noted.

Crucially, the trade deal has also faced resistance from labour group leaders, including Richard Trumka, president of the powerful AFL-CIO union, who last month warned that the agreement “would be defeated” if Congress voted before the U.S. Thanksgiving. American unions — who believe the original NAFTA did little to stop the flow of U.S. jobs to Mexico — are emphatic about the need to ensure labour reforms are fully carried out this time.

“The problem is organized labour is dead set against this deal,” said Gary Hufbauer, a senior fellow at the Washington-based Peterson Institute for International Economics. “If the unions double down against it and the Democrats vote it through anyway, I think it’ll hurt their chances in the election.”

House Speaker Nancy Pelosi, charged with the decision on whether to put the bill forward for a vote, could easily argue that with only a few weeks left in the political calendar, not enough time remains for Congress to consider the deal, he added.

U.S. President Donald Trump lashed out Pelosi and other Democrats last week, saying USMCA is “dead in the water” because of the party’s inaction.

Pelosi has insisted the Democrats are working hard, to “get to yes” on the deal, though she recently suggested a vote is unlikely in 2019. Pushing the deal into 2020 raises the risks of it languishing amid the runup to the U.S. presidential election, analysts have warned.

It could also see the deal reopened for further negotiations, something Ottawa and Mexico City have said is a non-starter, though Freeland said this week that Canada was prepared to do everything it can to ensure ratification.

“I do think if it spills into 2020 the new administration may take it back to the negotiating table whether it’s Trump or someone else elected,” Hufbauer said.

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