[CTC] Lighthizer floats Section 301 as potential enforcement tool for NAFTA

Wed Feb 6 15:50:08 PST 2019

Lighthizer floats Section 301 as potential enforcement tool for USMCA
Inside US Trade,  02/06/2019

U.S. Trade Representative Robert Lighthizer on Wednesday suggested that Section 301 of the Trade Act of 1974 could be used to enforce provisions in the U.S.-Mexico-Canada Agreement, senators told Inside U.S. Trade.

Following a meeting with the Senate Finance Committee and the Senate Advisory Group on Negotiations, a congressional aide said Lighthizer offered up Section 301, the tool behind multiple rounds of IP-related tariffs on Chinese imports, as a way to enforce USMCA.

“He said it repeatedly to us,” the aide said.

The enforceability of key USMCA provisions -- especially those related to labor and environmental requirements -- is a major concern for Democrats as they evaluate the deal.

Senate Finance Committee ranking member Ron Wyden (D-OR) said he told Lighthizer on Wednesday that “the key question for the days ahead is spelling out exactly how you are going to enforce a NAFTA 2.0.”

“That means, for example, how you are going to make sure that Mexico honors the efforts to improve labor standards because without that, it can’t protect American jobs,” he told reporters after the meeting.

Wyden then confirmed to Inside U.S. Trade that Lighthizer “obviously feels that he can use 301 in a creative way,” adding that discussions on the idea would continue.

“[Enforcement] is a fairly involved matter. I’ve been very troubled by fact that NAFTA 2.0 has the same sort of dispute settlement process as NAFTA 1.0. And they’ve not had any of these panels -- they always get blocked,” Wyden said. “So, he obviously feels that he can use 301 in a creative way. Well, the discussion will continue.”

The ability to block the establishment of dispute panels, as enshrined in USMCA’s state-to-state dispute settlement provision, has been flagged as key issue <https://insidetrade.com/node/165067> for the labor community. Critics say the state-to-state dispute settlement chapter in NAFTA was largely ineffective because a party could refuse to nominate panelists. The USMCA parties did not address that issue.

Sen. Catherine Cortez Masto (D-NV) said the exchange between the USTR and senators was a “great conversation” and called it a start toward a possible enforcement solution.

“There were conversations about enforcement challenges,” she told Inside U.S. trade. “Workers’ rights and labor issues and protecting those.” Asked if Section 301 was discussed as a potential enforcement mechanism, the lawmaker said “We talked about everything.”

 Section 301 of the Trade Act of 1974 says USTR can impose trade restrictions on another country if it finds “an act, policy, or practice of a foreign country violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement, or is unjustifiable and burdens or restricts United States commerce.”

Section 301 also specifies that a host of labor practices could be considered “unreasonable,” including “a persistent pattern of conduct that -- (I) denies workers the right of association, (II) denies workers the right to organize and bargain collectively, (III) permits any form of forced or compulsory labor, (IV) fails to provide a minimum age for the employment of children, or (V) fails to provide standards for minimum wages, hours of work, and occupational safety and health of workers.”

The Mexican Congress failed to meet a Jan. 1 deadline <https://insidetrade.com/node/165431> to pass legislation to establish labor reforms called for in the USMCA, with a bill introduced last December in the Chamber of Deputies unlikely to be addressed until this month.

Sen. Sherrod Brown (D-OH) said the only “path forward” for the deal must include a strong Mexican labor law.

“The whole idea of these trade agreements is so Mexico’s labor standards go up enough so they can start buying American products,” he told reporters after the meeting. “So far this NAFTA 1.6 is not close to that. I want to vote for it but it’s got to get better so that Mexico workers can buy U.S. products.”

Citing numerous conversations with Lighthizer, Brown said “I’ve told him I would like to vote for this but I’ve said it means labor standards have to be strong. He’s made progress there, but they have to be enforceable and they have not made progress on enforcement.”

Several senators said Lighthizer provided little clarity about how Section 232 tariffs on Mexican and Canadian steel and aluminum might be handled.

Sen. Lamar Alexander (R-TN), reiterating comments <https://insidetrade.com/node/165681> made last week by House Ways & Means ranking member Kevin Brady (R-TX), said he “can’t imagine” the Senate considering USMCA as long as the Section 232 tariffs -- which Canada and Mexico adamantly oppose -- remain.

“The highest price steel in the world is now in the United States,” Alexander told reporters. “And 50 percent of every car and truck is steel. So, you can’t build more cars and have more jobs in the United States if you have the highest price steel in the world deliberately.”

The “sooner” the tariffs are lifted, Alexander said, “the better.”

Sens. Tom Carper (D-DE) and Ron Johnson (R-WI) said they raised USMCA enforcement and the Section 232 issues during the meeting, with Johnson adding the USTR’s answer was “inadequate.”

Sen. James Lankford (R-OK) also told Inside U.S. Trade senators left the meeting with Lighthizer with few details on how USMCA might advance or whether the steel and aluminum tariff issue would be resolved in the near future.

Sen. John Cornyn (R-TX), chairman of the Senate Finance Committee’s trade panel, said he was “still mystified by this idea that that we’ve got a substitute for NAFTA, USMCA, and we still have those … steel and aluminum tariffs, which I think there’s just a very big difference in opinion between the administration and Congress about the utility of those tariffs.”

On USMCA’s path forward, Cornyn told reporters he supported the deal and would “like to try to help him get it passed but that it would make it immeasurably harder if the president decided to withdraw <https://insidetrade.com/node/165239> from NAFTA in the interim and try to jam Congress.”

Lighthizer, Cornyn continued, said “it’s not his decision but he believed the president had unilateral legal authority, which I disagree with. But it was ultimately the president’s decision and he’d communicate my comments to him.”

The U.S.-China talks were not the focus of the meeting, several senators said.

Asked if he was confident an agreement with China would be reached by early March, a deadline set by President Trump and Chinese President Xi Jinping, Sen. Bill Cassidy (R-LA) said after the meeting that Lighthizer “did not prognosticate as to if a deal would be reached.”

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

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