Apparel Industry Stakeholders Split on Timing of USMCA Ratification

NEW YORK -- Moises Kalach, leader of the Mexican Coalition for USMCA and vice president of a textile conglomerate in Mexico, said his organization has met with 172 House offices and 30 Senate offices, and has particularly targeted 94 House Democrats -- from border states, moderates, Hispanics, pro-free trade, or on the Ways and Means Committee (many members fit more than one category).

After all this lobbying, Mexican industry thinks there's a decent probability a vote will be held in the House this year, even though they recognize that House Speaker Nancy Pelosi wants to know that at least 60 Democrats will be voting for the NAFTA replacement before bringing it up. He said they think there's a “north of 50 percent" chance "this could happen in the next two weeks."

Kalach, like some House members, says the impeachment process is helping the chances that the U.S.-Mexico-Canada Agreement comes up for a vote, because it heightens the need for Democrats to show they are legislating, not just investigating the president. "We have good momentum going," Kalach said.

He warned attendees at the United States Fashion Industry Association Trade and Transportation conference that if they have factories in Mexico, labor relations are going to be a "big risk" going forward. He said the new way of electing unions is a "360-degree change from what we had before."

Bill Jackson, chief textiles negotiator for the Office of the U.S. Trade Representative, did not handicap the likelihood of passage, but said, "I think once it does go to the Hill, it could move very quickly."

Attendees at the Nov. 7 conference who answered an in-app poll are confident USMCA will be approved, with 87 percent saying they expect that. However, a quarter of attendees said they'd rather keep NAFTA than get the update. The update aligns textiles rules of origin with CAFTA standards, making them stricter in some small respects than in NAFTA.

David Spooner, USFIA Washington counsel, told them he thinks they're wrong. "In my humble opinion, Speaker Pelosi is being very clever at running out the clock until the next election," he said. Scott McCandless, a partner in PricewaterhouseCooper's tax practice, said he has become more pessimistic as well, believing Democrats will keep moving the goal posts on what will satisfy them enough to bring the bill forward.

One of the core demands of Democrats is to make the NAFTA rewrite more enforceable than NAFTA has been. They argue this because they fear the Mexican government will not follow through on labor reforms or environmental promises. But Kalach said Mexico also wants a fix on enforceability, as it has been on the losing end of what he called "a trick in the system" of state-to-state disputes. That trick was that if a country didn't name panelists, there could be no dispute settlement.

He noted that Mexican producers were disadvantaged on sugar, tomatoes and home appliances in the last year. "This is why it was very important for us for the dispute settlement to work," he said.