US economy

US business fears weakening of Nafta trade revamp

US business is in danger of losing key benefits in Donald Trump’s trade deal agreed last year with Canada and Mexico as congressional Democrats insist on late changes to the pact in return for ratifying it. 

Robert Lighthizer, the US trade representative, is weighing stripping the pact, known as USMCA, of provisions designed to boost sales of technology and pharmaceutical companies in America’s two neighbouring countries, according to people familiar with the matter. 

Mr Lighthizer has also asked Mexico to agree to tighten a requirement that US cars be made with a certain share of North American steel, which will unnerve global car companies manufacturing in the US. 

His move to lessen the advantages to US companies in the deal comes as the Trump administration has struggled to overcome resistance among congressional Democrats to the pact signed more than a year ago to replace Nafta. 

Mr Lighthizer and his team have been negotiating possible changes to the deal to make it more friendly to Democrats and labour unions for months — with the goal of reaching an agreement to send it to Congress for a vote by the end of this year. Although Nancy Pelosi, the House speaker, said a deal was “imminent” last month, the talks have dragged on, raising concerns that its approval might slip into next year or be jeopardised altogether. 

US business groups had always been lukewarm on the substance of the USMCA deal, which replicates most aspects of the Nafta pact, including the removal of the ability of US investors in Mexico to challenge any restrictions on their business in independent courts, and the tighter wage and content rules for auto manufacturing. 

But they supported the pact because of fears that Mr Trump may attempt to remove the US from Nafta entirely if USMCA fails to get congressional approval, and because of some measures that were favourable. Among them were a new digital chapter offering internet providers protection from liability for third party content in Canada and Mexico, and a pharmaceutical provision increasing the period of data exclusivity for manufacturers of biologic drugs before they faced competition from generics. But those two provisions are now in peril, amid Democratic scepticism of any steps that would be seen as gifts to the largest drug and tech companies. 

“Ambassador Lighthizer negotiated a pro-growth, pro-worker deal one year ago, but it’s no surprise special interest groups have made last-minute noise about certain provisions,” said Phil Cox, co-chair of the Trade Works for America coalition, a business group lobbying for the deal to be approved.

A spokesperson for PhRMA, the lobbying group for the US pharmaceuticals industry, said: “The agreement that was signed with Canada and Mexico last year was a key step in delivering strong IP protections for American innovators . . . If those protections are diminished, it will embolden foreign governments who want to steal American intellectual property and free ride on our world-leading biopharmaceutical research and development.” 

The Internet Association said in a statement: “Failing to include intermediary liability protections – which have been a part of US law for two decades – in USMCA would negatively impact the countless small businesses and entrepreneurs that use online platforms to export and advertise their businesses.”

Mr Lighthizer is negotiating on two fronts. Not only does he need the approval of congressional Democrats for any pact, but he also needs Mexico and Canada to agree to any changes. His demand that American carmakers use more North American steel in their manufacturing, first reported by Politico, still needs to be accepted by Mexican negotiators, who are already unhappy that the US is insisting on sending inspectors to Mexico to monitor its enforcement of tighter labour standards. USTR declined to respond to a request for comment. 

additional reporting by Hannah Kuchler in New York


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