A New Twist for Trump’s Long, Winding Path to USMCA

(Bloomberg) --

A big advantage of President Donald Trump’s pursuit of bilateral trade negotiations like his limited agreement this week with Japan is that it largely avoids the need to run those deals through Washington’s legislative gauntlet.

But Trump’s signature trade accomplishment so far — the U.S.-Mexico-Canada Agreement — is an exception that requires congressional approval. And suddenly, it risks being sucked into the maelstrom of an historic impeachment inquiry.

U.S. Trade Representative Robert Lighthizer said Wednesday he remains confident that the fundamentals of the new Nafta deal are sufficient to rise above today’s toxic political climate.

“It’s not all about politics in Washington, right?,” he said. “On the merits, this is demonstrably good for the people of the United States. And I think, for that reason, it will pass.”

His optimism isn’t unfounded. Several senior House Democrats have denied that Speaker Nancy Pelosi’s move on Trump will distract from their work on USMCA:

• House Ways and Means Committee Chairman Richard Neal, who leads USMCA and drug price talks, said he won’t let the impeachment process distract from his agenda.
• Representative Janice Schakowsky, an Illinois Democrat and a member of the USMCA working group, also denied impeachment will affect those efforts.
• A California Democrat, Jimmy Gomez, even said impeachment might actually help USMCA’s chances — borrowing a line from Game of Thrones that “chaos is a ladder.”
• Republican Senator Chuck Grassley warned Democrats not to prioritize impeachment proceedings over USMCA: “That would prove they’re more interested in politics and opposing the president at all costs than serving the American people.”

For his part, Trump didn’t sound as convinced as Lighthizer that Democrats can separate politics from the broader economic good.

“One of the biggest trade deals ever made. It's a fantastic deal for our country. And it's possible they won't vote. I mean, I know these people much better than you do,” Trump told Lighthizer after cutting him off. The trade chief has for months been working closely with Democrats to try and get the deal passed.

There’s the chance a president feeling imperiled could raise the stakes. Any rejection of USMCA by the Democratic caucus might revive fears that Trump will formally withdraw from the North American Free Trade Agreement in order to increase pressure on the House to act.

Trump declined to comment when asked about that strategy at the United Nations General Assembly in New York. About the only thing that remains certain: The unpredictability that has governed this administration’s approach to trade will continue — especially under the threat of impeachment.

Charting the Trade War

Peru is one of the world’s  most open economies, with trade agreements covering more than 90% of its exports. The 19 agreements in force have helped lift shipments of agricultural and manufactured goods at a time when slower global growth has hurt demand for the country’s top export, copper. The government isn’t satisfied and is seeking trade agreements with India, Turkey and El Salvador.

Today’s Must Reads

• Japan deal | The U.S. and Japan said they’ve reach a limited trade agreement as Washington withdrew the threat of imposing auto tariffs on the Asian nation for now.
• Factory funk | Singapore’s factory output plunged in August by the most in almost four years, a sign that the city state’s already painful manufacturing downturn is deepening.
• Turbulence ahead | U.S. tariffs sanctioned by the WTO on European airplanes and luxury goods are emerging as a new risk not just for Airbus but also for U.S. airlines. 
• Export outreach | Colombia is looking to boost trade with Asian countries as it seeks to protect the nation and diversify amid a global trade war, President Ivan Duque said.
• 5G battles | Huawei is ready to license his fifth-generation networking technology only to one other company, and the company’s founder wants that potential arch-rival to be American.

Economic Analysis

• China insights | The key to growth in the next decade lies on a renewed commitment to reform.
• Business options | Trade wars and global protectionism as threats to cross-border transactions.

Coming Up

• Sept. 28: Vietnam’s exports and imports
• Sept. 30: Phil Hogan’s hearing to be EU trade commissioner
• Oct. 1: South Korea trade balance
• Oct. 3: Australia trade balance

--With assistance from John Quigley and Jordan Fabian.

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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