USTR Says He'll Clarify Biologics, Plus-Up Enforcement to Get Support for New NAFTA

When asked how negotiations are going with House Speaker Nancy Pelosi, U.S. Trade Representative Robert Lighthizer said that as far as he's concerned, her actions are "exactly as you would hope she would be." He also said, "The speaker has been completely fair and above board." The ratification of the new NAFTA must begin in the House of Representatives, and although Lighthizer was testifying June 18 in the Senate, everyone in the room knows Pelosi has the most power to determine the trade deal's fate.

Lighthizer told Sen. John Cornyn, R-Texas, that he knows generally what Democrats want changed in the trade deal, now called the U.S.-Mexico-Canada Agreement. Lighthizer said he knows what adjustments are still possible but will need someone to sit on the other side of the table who was empowered to say: "Yes, this is enough." Pelosi is facilitating that by appointing a working group of nine people, including the Ways and Means Committee chairman, Trade Subcommittee chairman, and seven other Democrats from the center and left wings of the party, representing constituencies in the Northeast, Northwest, Midwest, South and California. Lighthizer said he hopes that over the next couple of weeks he can make substantial progress in negotiating with the working group.

Two of the concerns the working group has -- biologics and enforcement -- were brought up by Democrats on the Finance Committee, and the latter issue was emphasized by nearly every Democrat on the committee. Most endorsed the Brown-Wyden proposal, which would bar tariff benefits for imports if an audit of the factory that produced them found labor violations. Lighthizer did not endorse that bill, but said he will work with Democrats to satisfy them that the pact will be enforced.

Sen. Ben Cardin, D-Md., told Lighthizer that editing the pact's enforcement provisions needs to be dealt with before members "who really want to support the USMCA" can move forward.

Lighthizer said, "We'll work on plussing those up," and agreed with Cardin that Mexico doesn't have the capacity right now to fulfill its ambitious labor reforms.

"We have to have provisions in here where we help them build their capacity to do it," he said, and Canada is committed to helping, too.

Lighthizer said he and the president don't want to ratify an agreement -- one he predicted "will help stop the outflow of manufacturing jobs and return many to the United States" -- and have it peter out after the Trump administration is out of office. "I view it as part of our legacy," he said.

But despite these assurances, Lighthizer defended the decision to leave a weakness in the NAFTA enforcement provision in place. Currently, any country can block a panel being formed, and he said, "we left that in place largely because we don’t want to be in a position where someone can challenge U.S trade laws.

"We expect 99 percent of the time maybe even 100 percent of the time you’re going to end up with panel discussions and panel decisions."

On biologics, Sen. Debbie Stabenow, D-Mich., said the rewrite is "a giveaway to drug companies," and questioned why Canada, which has cheaper prescription drugs than the U.S., should have to up the period before generic competitors can come onto the market. The U.S has a 12-year data exclusivity period and Canada has eight.

"What we compromised on was 10 years," Lighthizer said. "There are no provisions in this agreement that will change U.S. laws with respect to pharmaceutical companies."

Stabenow argued that it will stop Congress from changing the law in the future. "You’re locking in something that I believe is gonna stop us from doing what could be done to lower prices," she said.

Lighthizer said he doesn't think that is the case, but if members believe there is "anything in here that will stop you or slow you up from changing laws, then we have to correct that."

Lighthizer also addressed the question of counterfeit imports, and he said the NAFTA rewrite is a substantial improvement over the status quo, because it requires Mexico and Canada to stop counterfeits they detect that are destined for the U.S. market. But aside from that "ex-officio" power, Lighthizer said the administration is considering tackling counterfeits with postal regulations.