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 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.
I'm not sure exactly what they have in mind here, but if Section 301 will be used to make a unilateral determination of a violation and then to impose tariffs, it won't make the USMCA enforceable. It will just lead to Canada and Mexico retaliating with their own tariffs (the Section 232 steel/aluminum tariff example is instructive here), rather than complying with U.S. demands. There is no way to use Section 301 as an effective USMCA enforcement tool.
The way to make the USMCA enforceable is simply to have dispute settlement rules that ensure that panels are appointed. It's not very difficult. Canada and Mexico would be on board, and the current rules can be adjusted without too much difficulty. Inu and I wrote about this here.
