Trump administration working with Democrats on USMCA ratification following months of deadlock

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The Trump administration is working on a deal with congressional Democrats to ratify its overhauled trade agreement with Canada and Mexico, showing the first tentative signs of movement after months of deadlock.

U.S. Trade Representative Robert Lighthizer told a hearing of the Senate finance committee on Tuesday that he hoped to make “substantial progress” in talks on the United States-Mexico-Canada Agreement (USMCA) over the next two weeks.

“I look forward to working with members to make [the trade agreement] even better and to write implementing legislation that will earn large, bipartisan support,” Mr. Lighthizer said. “We’re on track.”

The sudden action comes days before Prime Minister Justin Trudeau is scheduled to visit Washington to push for ratification. He will travel to the U.S. capital on Wednesday evening and meet on Thursday with President Donald Trump, House of Representatives Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell. He will sit down with Mr. Trump at the White House for an hour and a half, including lunch.

It also comes the week before Mr. Trump plans a bilateral meeting with Chinese President Xi Jinping at the Group of 20 summit in Japan, raising hopes that the world’s two largest economies may begin to resolve their bruising trade war. Markets rallied on Tuesday when Mr. Trump announced the tête-à-tête.

Canada is timing its ratification of the USMCA to coincide with that of the United States. Parliament is set to rise on Friday, but Mr. Trudeau is prepared to have it recalled over the summer if Congress passes the agreement then.

Both the Canadian and Mexican governments have legislative majorities that will make ratification relatively straightforward. The primary obstacle is the U.S. Congress, where Democrats are trying to extract changes to the deal in exchange for supporting it.

Ms. Pelosi last week appointed a nine-member Democratic task force to handle the talks. And she said last week that she wants to find a way to approve the pact. “We want to be on a path to ‘yes,’” she said at an event of the Peterson Foundation, a think tank on economic issues.

The Democrats’ primary demand is that the Trump administration do more to enforce labour standards in the deal that are meant to discourage manufacturing companies from relocating to Mexico in search of a cheaper work force.

Senators Ron Wyden and Sherrod Brown, for instance, have proposed negotiating a side agreement to the USMCA that would allow U.S. officials to inspect Mexican factories suspected of breaking labour standards and oblige Mexico to hire more enforcement staff as well.

“When it comes to … the enforcement of our trade laws, there is sure some heavy lifting to be done,” Mr. Wyden told reporters at the U.S. Capitol on Tuesday.

Mr. Lighthizer wouldn’t endorse Mr. Wyden’s and Mr. Brown’s proposal, but said he would speak with them on some sort of compromise. “I will certainly work with Senator Wyden and Senator Brown, and other members … and have every expectation that we’ll come to a conclusion that is satisfactory,” he said.

Mexico, however, is unlikely to agree to American inspectors carrying out enforcement on its territory. And Mr. Trump’s unpredictable behaviour could still derail his signature trade achievement. Earlier this month, just as Mexico began moving forward with ratification, he abruptly threatened to impose tariffs on all of the country’s goods unless it did more to crack down on refugee claimants. Mr. Trump withdrew the threat after a few days.

Kellie Meiman Hock, a former U.S. trade negotiator, said she believed the Democrats are negotiating in good faith, but the outcome is far from certain and it is unlikely a deal will be reached quickly enough for the USMCA to pass before Congress’s August recess.

“The Democrats are very open to coming to a deal that would get us all to ‘yes.’ That’s going to take some time and effort,” she said in an interview.

One Canadian industry representative, meanwhile, argued Canada should just go ahead and ratify the USMCA to push the United States to do the same.

“It is very important for this government to show, especially to the Democrats in Congress, that they are serious about this deal and that we are independently going down a ratification process,” Flavio Volpe, head of Canada’s Automotive Parts Manufacturers Association, told a House of Commons legislative committee on Tuesday.

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