Trade Lawyers Say New NAFTA's Passage Remains Uncertain Even After Section 232 Tariffs Lifted

The Trump administration tried for months to insist that Mexico and Canada accept quotas on their steel and aluminum, and the fact that the administration lifted its tariffs on those metals on its NAFTA partners without any import restrictions shows "just how much the Administration has invested in passage of the USMCA," wrote Ted Murphy, managing partner of the Baker McKenzie office, in a blog post.

Murphy said that this change in position creates movement for passage of the U.S.-Mexico-Canada Agreement in Canada and Mexico, and is designed to increase pressure on Congress to ratify it, too. Republicans in the Senate were not willing to advance the new NAFTA unless these tariffs -- and crucially, the retaliatory tariffs from Mexico and Canada on agriculture -- were gone.

Dan Ujczo, who chairs the Canadian-U.S. trade practice at Dickinson Wright, said even though lifting these tariffs was necessary, it's not sufficient. The USMCA vote has to begin in the House of Representatives, and Democrats have the power there to decide whether it's worth taking a trade vote for it.

"As of now, there is no change," he said.

House Ways and Means Committee Chairman Richard Neal, D-Mass., welcomed the end of the tariffs, but issued a statement May 17 that said: "When it comes to the new agreement, House Democrats continue to have a number of substantial concerns related to labor, environment, enforcement, and access to affordable medicines provisions. Those issues still need to be remedied."

While there are no tariff rate quotas as part of the deal, the agreement does say that the countries will monitor for import surges, and if one is detected, a product that was melted and poured in North America will be viewed differently from one that was made with steel or aluminum imported from elsewhere. "The melt and pour standard is a nod to labor who is critical to get onside with USMCA as soon as possible," Ujczo e-mailed. "We will see if it works."

Both Murphy and Ujczo are concerned about the chances of passage, but for different reasons. Murphy said that the auto industry will only provide tepid support for the new deal, because the specter of Section 232 tariffs or quotas on imported autos and auto parts is still haunting the industry. That, he said, "does not help the chances of passage."

Ujczo said he's worried that the White House just gave away its best piece of leverage to get "yes" votes, and said to win Democrats' votes, it will need to trade on immigration, prescription drugs or infrastructure. "This is not about policy anymore, this is raw politics," he wrote.