[Congressional Record Volume 166, Number 9 (Wednesday, January 15, 2020)]
[Senate]
[Pages S208-S211]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              UNITED STATES-MEXICO-CANADA TRADE AGREEMENT

  Mr. TOOMEY. Mr. President, it appears that we are likely to be 
considering some version of the USMCA, implementing legislation this 
week, so I want to address this agreement, but in order to do that, I 
think we have to start with the underlying NAFTA agreement, which has 
been in place for some years, and ask a question, which is, Why did we 
go down the path of renegotiating NAFTA in the first place? Let's start 
there.
  As I can imagine, one reason that one might want to renegotiate a 
trade agreement is if the trade agreement in question were not a 
reciprocal agreement. If it treated one party differently than it 
treated the other parties, then you might question whether that is a 
fair arrangement and might decide that if it is not, it needs to be 
revisited. That certainly would not describe NAFTA. NAFTA is entirely 
reciprocal.
  Another reason one might decide to renegotiate a trade agreement is 
if there were tariffs--meaning it wasn't really a free-trade agreement; 
it was an agreement that maybe changed the terms of trade. But if you 
still had tariffs, you might decide, as a free-trader like me, that it 
would be a good idea to renegotiate so that we can eliminate the 
remaining tariffs.
  Well, that certainly isn't the motivation, either, because with 
NAFTA, there are zero tariffs on 100 percent of manufactured goods that 
cross the borders of any of the three countries that are parties and 
zero tariffs on 97.5 percent of agricultural goods. So really there is 
not much more to do on the tariff side.
  By the way, that is true about any other kinds of restrictions on 
trade. There are no quotas, no obstacles. This is a free-trade 
agreement. That is what it is. It is fair, it is free, and it is 
reciprocal among the three countries. As a matter of fact, since NAFTA 
was adopted, U.S. exports to Mexico, for instance, have increased 500 
percent. That is true of Pennsylvania exports to Mexico, as it is on 
average for all 50 States.
  I will state that modernizing the agreement always made sense, right? 
We now have this huge digital economy that did not exist back in the 
early nineties when NAFTA was adopted, so it definitely makes sense--it 
always makes sense to modernize, to update. But I think it is very 
clear that modernizing and updating were not the driving motivations 
for renegotiating NAFTA and adopting USMCA. The fundamental reason was 
that we have a trade deficit with Mexico. It is pretty persistent every 
year. It is not a huge deficit, but we have a trade deficit with 
Mexico, and that was deemed to be unacceptable to the administration.
  So the fundamental purpose of renegotiating NAFTA and the reason 
Mexico and Canada had to be coerced into this new agreement was so that 
we could diminish exports from Mexico. Despite the fact that economists 
universally understand that a trade deficit with a country like Mexico 
is a meaningless measure, nevertheless, that is the goal.
  Since trade in cars and car parts is the source of the trade deficit 
with Mexico, it is the auto sector that bears the brunt of the 
restrictions.
  Let me suggest that one useful way to think about USMCA is that it is 
NAFTA with two categories of changes. The first category is the modest 
constructive modernizations I alluded to. They are mostly taken from 
the Trans-Pacific Partnership Agreement that had been negotiated by a 
previous administration. Examples include requiring that there be free 
digital trade. So you can't impose a tax on a data transfer, for 
instance, or you can't impose a tariff on software, and you can't 
require that data be stored locally. These are good things.
  It is important to note they are codifying existing practices. 
Canada, Mexico, and the United States do not currently impose obstacles 
and tariffs on this kind of economic activity. Under USMCA, they won't 
be able to; it will be codified. So we will make permanent that which 
is already the practice. There is a very, very tiny reduction in 
Canadian protectionism with respect to dairy products.

  For the most part, these modernizing features are modest, they come 
from TPP, but most importantly, they could have been achieved without 
the second category of changes I am about to describe. They could have 
been achieved because they weren't really controversial.
  The other important category of changes to NAFTA that USMCA contains 
is a full series of protectionist measures that are designed to 
diminish trade and/or investment. So for the first time in certainly 
modern times, we are going to consider a trade agreement that is 
designed to diminish trade, which should be very disturbing for those 
of us who understand how

[[Page S209]]

much economic growth comes from trade.
  What are some of the specifics? Well, the specific changes that are 
meant to diminish trade--as I said, the auto sector bears the brunt of 
it. It really is the end of free trade in automobiles and auto parts 
with respect to Mexico. The agreement imposes minimum wage requirements 
that are designed to be impossible for Mexican factories to meet, and 
when they don't meet them, Mexican autos and auto parts will be subject 
to a tax. So Americans who buy these cars will have to pay a tax on 
them. This is designed to make Mexico and Mexican factories less 
productive.
  We have folks who think that is somehow a good thing for the United 
States. It is not. This minimum wage requirement and the tariffs that 
will follow from it will simply make the entire North American auto 
industry less competitive because we have integrated supply chains, and 
American domestic manufacturers use parts that originate in Mexico. 
Those parts will now be more expensive. It will mean higher prices for 
American consumers, who will have to pay more money for a car and 
therefore will have less money available for any of the other things 
they would like to consume. It will probably lead to an increase or 
acceleration in the shift to automation because when you artificially 
establish an arbitrary wage rate that is unaffordable, it creates an 
incentive to avoid labor costs entirely with automation. All of that 
means fewer jobs.
  We are already seeing a reduction. We have a terrific economy 
generally, but the manufacturing sector is actually not participating 
in this tremendous expansion. We have been losing jobs in manufacturing 
as a result of tariffs we have been imposing.
  With the full anticipation of this agreement coming, the auto sector 
in the United States of America has been shedding jobs. We have been 
losing jobs as employers in this sector see where we are heading on 
this policy. That is one item.
  Another way we are restricting trade is by arbitrarily putting an 
expiration date on this trade agreement. It expires 16 years from the 
date of enactment. There is a mechanism by which, if all three parties 
unanimously and simultaneously agree, they can extend it, but the 
default setting is for this thing to go away, for this to expire.
  We have never put a termination date on a trade agreement. On all of 
the trade agreements we have done--and there are dozens--we have never 
had an expiration, and there is a good reason. The reason is, as you 
get anywhere close toward that expiration date, an uncertainty emerges 
about what the trade regime would be like if the agreement is not 
extended. That has a chilling effect on trade and investment, so it is 
a very bad idea.
  Our Trade Rep has argued that, well, these trade agreements ought to 
be renegotiated periodically anyway. First of all, not necessarily--a 
free and fair and reciprocal trade agreement that has no barriers to 
trade doesn't necessarily need to be renegotiated with any specific 
frequency, and secondly, it can be renegotiated without an expiration. 
The question is, What is the default setting? Do we assume the 
arrangement continues, or do we assume the arrangement ends? 
Unfortunately, in USMCA, it all comes to an end.
  There is another provision that is very disturbing, and that is the 
almost complete destruction of what is known as the investor-state 
dispute mechanism. This is the mechanism by which American investors in 
Canada and Mexico, in this case, can adjudicate a dispute because 
sometimes the local court in those countries does not treat the foreign 
investor--the American investor--in that country fairly. That happens 
sometimes.
  So 50 or more of our bilateral investment treaties and trade 
agreements have this mechanism, the investor-state dispute settlement 
mechanism, so that if an American investor or an American employer with 
an investment overseas in one of these countries is being treated 
unfairly, they have a place to go to get a fair adjudication of their 
dispute.
  In March of 2018, 22 currently serving Republican Senators sent a 
letter to the Trade Representative. It says: ``ISDS provisions at least 
as strong as those contained in the existing NAFTA must be included in 
the modernized agreement to win congressional support.''
  There is actually a broad consensus about its importance, which is 
why it is in every other trade agreement we have ever had. But USMCA 
completely guts these investor protections. It limits it very narrowly 
to just several sectors in Mexico and eliminates it entirely in Canada. 
The irony of this is, in the 30 years that we have had these investor-
state dispute settlement provisions, every time the United States was a 
litigant, the United States won.
  This has been a jurisdiction that has been very, very helpful to the 
United States, and we have given it away. It is out the door. That is 
because there are some, I think, advocates for eliminating this who 
think, in a classic protectionist mindset, that an investment in 
another country necessarily comes at an expense to investment in 
America. That is completely wrong. Most investment overseas is meant to 
serve overseas markets, and it results in jobs in the United States in 
management and supervision and accounting and planning and all kinds of 
aspects of overseeing that investment overseas. But now we are going to 
have a chill imposed on this activity.
  Well, those provisions I just described were the deal as it was 
reached back in May, and at that point, our Democratic colleagues said 
that the agreement was not acceptable. So our Trade Rep and a number of 
House Members, in particular, entered into a whole new series of 
negotiations, and from there, the agreement got worse.
  What happened there--let me talk about just a couple of categories. 
One is a whole set of labor provisions. Basically, the United States 
forced Mexico to pass labor laws designed to facilitate the 
unionization of their factories. It is none of our business what the 
labor laws are in Mexico, but we forced them to pass these laws.
  Then it gets worse. The USMCA creates this elaborate mechanism by 
which American taxpayers are forced to pay to enforce Mexican labor 
laws. Richard Trumka, from the AFL-CIO, said: ``For the first time 
there truly will be enforceable labor standards--including a process 
that allows for the inspections of factories and facilities that are 
not living up to their obligations.''
  So he is alluding to the mechanism that is established in USMCA to 
allow site inspections. I remind my colleagues that this agreement is 
fully reciprocal. I wonder how much American businesses are going to 
appreciate having Mexican inspectors come in to inspect their 
facilities to see if they are in compliance with American labor law. 
This is there because it is perceived to be in organized labor's 
economic interests.
  First, it increases the expense and diminishes the productivity of 
Mexican plants, which some people think is a good thing. I think it is 
a bad thing for American consumers to have to pay more than necessary. 
But in any case, American taxpayers are going to pay hundreds of 
millions of dollars over years to enforce another country's labor laws.
  Another provision that was insisted on in the latter parts of the 
negotiation is the removal of intellectual property protection for 
biologics. As you know, biologics are complex new medicines derived 
from living cells. It is one of the most exciting things in medicine 
because it has allowed scientists to use living organisms--or these 
cells from living organisms--to produce wonderful, wonderful curative 
medicines. It is very exciting.
  Under U.S. law, when a business develops such a new medicine, which 
comes at enormous cost to get it to market, we provide 12 years' worth 
of what we call data exclusivity. It is the exclusive ability to market 
that medicine so that the company can recoup the billions of dollars 
that are spent developing it.
  Well, 12 years is the period of protection we provide for that 
intellectual property. When the Trans-Pacific Partnership was being 
negotiated, the Obama administration insisted on at least 8 years. We 
are the only country that is, by far, the leading country in developing 
this new category of medicine. We are the ones who have the incentive 
to protect this intellectual property. Other countries--such as Mexico, 
Canada, and other countries around the world--don't really care

[[Page S210]]

about protecting it because it is not theirs. They argue for less 
intellectual property protection; we argue for more. That is the 
general nature of the context.
  As I said, under the Trans-Pacific Partnership, everybody had agreed 
on 8 years. Not in USMCA. In USMCA, we agreed to zero--zero--no period 
of data exclusivity to protect the intellectual property of this very 
exciting, new kind of medicine. This is so ironic because right now--as 
an aside--we are in this ongoing, protracted, tough battle with China 
over a number of their economic practices. Chief among them is their 
theft of intellectual property. We are rightly insisting that we are 
going to defend and protect our intellectual property because it is the 
crown jewel of the American economy. The most precious thing we have is 
the creativity of the American people. So we are insisting that we have 
robust protection for intellectual property. Here, in USMCA, we give it 
away. We just give it away.
  There is another aspect of this that is important to consider, and 
that is that there is not going to be any boost to economic growth as a 
result of swapping out NAFTA for USMCA. The U.S. International Trade 
Commission, which is an independent agency, part of the U.S. Federal 
Government, did a big, extensive study, and they did a report.
  Their report said that USMCA will create a net of 176,000 jobs. Well, 
if that were true, it would be trivial in the context of our economy. 
Our economy has been creating more than that number of jobs every month 
for years now. It is a tiny number for 72 months when we have been 
producing more jobs than that each and every month--not over 72 months. 
But worse than being a very small number, it is just not true. The 
study says that, on balance, the trade restrictive provisions, some of 
which I alluded to, will diminish trade and cause U.S. growth to 
decline, and any offsetting growth just comes from reducing the 
uncertainty about whether the free trade and digital trade that I 
alluded to continues.
  However, the ITC cost-benefit analysis explicitly chose not to 
attempt to quantify the sunset clause. There is no question that is a 
negative. They didn't even attempt to quantify it. They did their 
analysis before these new labor provisions and before the abandonment 
of protection for intellectual property of biologics--before that even 
emerged on the scene. We know those have a negative effect on growth. 
The bottom line is, there is going to be no additional economic growth 
from this agreement.
  But there is a tax increase. The Congressional Budget Office did 
their analysis, and they concluded--rightly--that there will be tariffs 
added to the sales of cars. American consumers will be paying a tax 
increase in the form of this tariff on autos and auto parts. That is 
definitely part of this agreement.
  To conclude on the substantive matters, we took a true free trade 
agreement, and we added some constructive features. We did some 
modernizing from the Trans-Pacific Partnership, which was constructive, 
but then we slapped on an expiration date. We imposed costly new 
restrictions on one of our trading partners. We eliminated the dispute 
settlement mechanism for U.S. investors. We dropped the intellectual 
property protection for the most innovative medicines we have. We 
saddled American taxpayers with $84 million over 4 years to enforce 
Mexican labor and environmental laws. For all of this, we get basically 
no additional economic growth--probably a little bit.
  It is worth noting that the Members of this body who have proudly and 
openly opposed every trade agreement they have ever been asked to cast 
a vote on--they voted no. On this, they are going to vote yes. For the 
first time in two decades, the AFL-CIO is supporting a trade deal when 
they have opposed all free trade agreements. There is a reason. It is 
because we are going backward on trade. It is because this agreement is 
designed to limit trade.
  A quick word on process here--this is important. The implementing 
legislation that is going to get to the floor one way or another 
sometime soon is not compliant with trade promotion authority. What 
that means is, it should not get the expedited treatment and the 
protection from all amendments that trade promotion authority confers 
on a narrow category of legislation that conforms completely--
completely--with the trade promotion authority law.
  Let's remember a few fundamental things here. Trade policy is the 
responsibility of Congress. The Constitution assigns it to the U.S. 
Congress to establish trade policy, including the establishment of 
tariffs, the management of tariffs, and everything to do with trade.
  With TPA, we delegate the responsibility that is ours to the 
executive branch with a lot of conditions attached, and if they don't 
comply with those conditions, then this legislation shouldn't be 
whisked through Congress on a simple majority vote with no amendments, 
which is meant, under TPA, to be limited only to those pieces of 
legislation that comply entirely with the trade promotion act 
legislation.
  Here are a couple of specific ways in which this agreement violates 
the trade promotion authority. First of all, Congress did not receive 
the final agreement according to the timeframe contemplated by TPA. We 
are supposed to get the final agreement 30 days before there is a vote 
in committee or on the floor on the implementing language. The reason 
that is important is so that Congress can give some feedback to the 
administration. This is a draft that is meant to be a draft of the 
implementing legislation submitted to Congress so that Congress can 
then consider how it might want to make changes since this is, after 
all, our responsibility. The administration chose not to do that at 
all. They finalized this agreement in early to mid-December, and there 
was a vote on the House floor on the final version of the implementing 
language within a week or so--nothing close to the 30-day period that 
is meant to enable Congress to influence its own product.
  There is another provision in the trade promotion authority 
legislation that requires that the implementing legislation must 
contain only provisions ``strictly necessary or appropriate to 
implement such trade agreement.'' Why is that important? It is because 
we passed this legislation with a 51-vote threshold--simple majority 
threshold. Almost everything else in the Senate requires 60 votes. So 
we are saying that if you want to use the expedited process and if you 
want to be able to pass this legislation with a simple majority, you 
have to limit it only to that which is absolutely strictly necessary 
and appropriate for implementing this trade agreement; otherwise, 
obviously, people could stick in any old thing they want that they 
think there is a majority vote for if there are not 60 votes for it. In 
other words, abusing this narrow construct really dramatically 
underlines the 60-vote threshold for legislation in the Senate.
  Well, let me give you a few examples of cases where it is clearly 
being abused in this agreement. One is that there are appropriations in 
the implementing legislation. This is a complete first. In all of our 
trade agreements in the past, there has been a necessity for some 
spending. The appropriations bill to spend that money has always been a 
separate legislative vehicle precisely so that it would be open to 
scrutiny, subject to amendment, and subject to a 60-vote threshold. Not 
this time. The hundreds of millions of dollars of spending in this bill 
include, for instance, $50 million in salaries and expenses for the 
office of the U.S. Trade Rep. Well, maybe the folks at the U.S. Trade 
Rep all deserve a big raise; maybe that is true. But that should be 
done in a separate piece of legislation because it is not necessary and 
appropriate for the implementation of USMCA. Not only that, but they 
have taken all of this spending and imposed an emergency designation on 
it. There is an emergency designation on it. So, apparently, it is an 
emergency that the folks over at the U.S. Trade Rep's office get a pay 
raise. Apparently it is an emergency that all this money be spent. That 
is ridiculous; of course it is not. The reason they put the emergency 
designation on it is that spending in this body--spending in Congress 
that gets an emergency designation doesn't have to be offset. So if it 
exceeds the permissible maximum spending we have all agreed to and if 
you slap on an emergency designation, then that is

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OK. If you don't have the emergency designation, then new spending has 
to be offset with reduction in spending somewhere else.
  The reason we have the emergency designation is that emergencies 
actually can occur. There are earthquakes; there are fires; there are 
floods; and those happen. But I am sorry, a pay raise for staffers at 
the U.S. Trade Rep does not qualify.
  So, for a variety of reasons, this legislation we are going to be 
considering is not compliant with trade promotion authority. That 
doesn't mean it can't move. It simply means it needs to move under the 
regular order. It should be an ordinary bill on the floor as any 
ordinary legislation, and, sadly, from my point of view, I am pretty 
sure the votes are there to pass it. There are probably going to be the 
votes to pass what I think is a badly flawed agreement--an agreement 
that restricts trade rather than expanding trade. I certainly hope we 
will do it under the regular order because it does abuse trade 
promotion authority.
  The last point I would make is that I certainly hope this does not 
become a template for future trade agreements. We have an opportunity 
to do wonders for our constituents, our consumers, and our workers by 
reaching new and additional trade agreements with the UK, Japan, 
Vietnam, and all kinds of countries that have tremendous growth 
potential, and our economy will grow if we can work out mutual free 
trade agreements with these countries. I am very much in favor of that. 
I wouldn't want these protectionist, restrictionist policies that found 
their way into this agreement to be part of future agreements.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. CORNYN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Braun). Without objection, it is so 
ordered.

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