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Trump impeachment could derail USMCA
USMCA is set to replace NAFTA, the current trade deal between Mexico, the U.S. and Canada – Photo: Saul Loeb/AFP

Trump impeachment could derail USMCA

26/09/2019
14:05
Newsroom & Agencies
Mexico City
Jeff Mason, Mary Milliken, Anthony Esposito, Andrea Shalal, David Ljunggren, Fergal Smith, Miguel Angel López, Tom Brown & Cynthia Osterman/REUTERS & Ivette Saldaña & Victor Sancho/EL UNIVERSAL
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The investigation leading to impeachment against U.S. President Donald Trump could further delay the ratification of the trade deal between Mexico, the U.S., and Canada that would replace the current North American Free Trade Agreement (NAFTA)

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The approval in the U.S. Congress of the trade deal between Mexico, the United States, and Canada (known in the U.S. as USMCA, and in Mexico as T-MEC) could be delayed or deferred until next year due to the investigation leading to impeachment against U.S. President Donald Trump.

The beginning of the investigation to determine if Trump abused his power or incurred in any other irregularity in the call of July 25 to Ukranian president Volodomir Zelenski in which he asked several times to investigate Hunter, son of former Vice-president Joe Biden (the favorite to compete against Trump in the 2020 elections), opens the door to a new reality in U.S. politics that would not only affect the already divisive climate in that country, but that will also give shape to the election campaign and the legislative work in the Congress.

Trump alerted that democrats’ “fixation” with the impeachment could affect the ratification of USMCA. “They are wasting time in this manufactured crisis,” he complained. “The ballot could not go on,” he added, contradicting his Trade representative, who gave a bit of light and hope of there still being options. Trump said he knows those in the Congress better.

American analysts have given up hope, not only for USMCA but also for other trade deals, such as an eventual one with China, and in general for initiatives that could become stagnated.

“The idea of bipartisan action on the issue of setting prices in medication, infrastructure, and potentially the approval of USMCA, are dead until the 2020 elections,” considered the analysists Ed Mills and Chis Meekins, of Raymond James firm, consulted by U.S. TV station CNBC. Dan Clifton, from Strategas Research Partners, agreed: “In the short term, it means that it is improbable for [USMCA] to progress. Last week, Nancy Pelosi said she wanted to achieve the approval  [of USMCA]. That will probably change,” he asserted.
 

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Democrats insist that talks on USMCA are still being held. Richard neal, who leads the Committee on Ways and Means that negotiate the changes to the deal, said so. “There is no reason, based on what happened [on Tuesday], to think that there are deterrents hindering [negotiations],” he said.

In Mexico, former assistant secretary of Foreign Trade, Francisco de Rosenzweig, now a consultant in White & Case, and chief economist of the American Chamber of Commerce of Mexico (AmCham), Luis Foncerrada, agreed on the possibility that Trump’s impeachment is generating noise and will affect the ratification of USMCA in the American Congress.

“Definitely, this process could stop USMCA because it would not be consistent to push its approval for it not being approved,” considered Foncerrada.

He also said that to the risk of the deal not being approved adds Trump’s threat that if the Congress does not ratify USMCA, then the U.S. will leave the current North American Free Trade Agreement (NAFTA), with which the region would be left with no trade conventions. Nevertheless, he trusts that there are American groups that would look to halt any decision addressed to disappear free trade agreements between the U.S., Mexico, Canada.
 

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Rosenzweig commented: “As long as we have NAFTA we must keep pushing for the ratification and it seems to be that we should also be calm since NAFTA has been beneficial for the three countries.”

Enquiries for an impeachment are, he said, “another distraction from the activities of the U.S. Congress, but I also think that it is of key relevance on the progress toward the ratification of USMCA.”

He added that deals are usually not well regarded by legislators, so given the current scenario, the most important is to prevent a new renegotiation from taking place and to hope for its ratification, be it in 2019 or 2020.

Assistant secretary and negotiator for North America Jesús Seade was more positive. “The big question: Will the impeachment derail USMCA’s ratification? I say no. In the chaos of the political process [in the U.S.], congress members will not want to provide further uncertainty to [American] constituency,” he wrote on Twitter.

According to USMCA negotiators who asked not to be named, the discussion of trade deals in the U.S. Congress has never been a priority, so the current situation complicates everything. “There was a window of opportunity for the USMCA to be approved in this period of sessions in the U.S. But the impeachment clouds the environment and lessens the little visibility that USMCA had achieved to be considered,” said the source.

On Wednesday, U.S. President Donald Trump warned that an impeachment inquiry against him could derail congressional approval of a North America trade pact, dragging down Mexico’s peso and stock market as investors fled riskier assets.

On Tuesday, Pelosi announced that Democrats in the House of Representatives had launched a formal impeachment inquiry into Trump, accusing him of seeking foreign help to smear Democratic rival Joe Biden ahead of next year’s election.

On Thursday, Pelosi said that the House of Representatives is working to ratify the trade deal with Mexico and Canada in a news conference regarding the pact that will substitute NAFTA.

Canada, the United States, and Mexico signed the agreement last year to replace the trillion-dollar North American Free Trade Agreement (NAFTA), and it must now be ratified.

Mexican President Andrés Manuel López Obrador said the deal should be passed by the U.S. Congress quickly, not left until closer to the November 2020 U.S. presidential election.

“It’s better if this gets resolved soon. It’s in the interest of all three nations,” López Obrador told journalists at a daily media briefing.

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Canadian Prime Minister Justin Trudeau said, “We’ve always been focused on the ratification of the USMCA in a way that tries to go beyond the partisan differences in the United States.”

“Our focus remains on ensuring that this deal ... goes forward and that’s what we are going to remain focused on,” said Trudeau.

Mexico's peso MXN= slipped as much as 0.9% versus the dollar to an almost three-week low and the benchmark Mexican stock index.MXX fell as much 1.24%, with banks citing the impeachment inquiry as sapping investor appetite for risk. Both the peso and stock index recovered slightly in later trading.

The Canadian dollar CAD=D4 has been little changed at about 1.3260 to the U.S. dollar, or 75.41 U.S. cents since the launch of a formal impeachment inquiry. The Toronto stock market .GSPTSE has fallen about 0.7% since Monday as lower oil prices weighed on energy stocks.

Capital Alpha Partners said it lowered its estimated likelihood of passage for USMCA to 30%. “USMCA is on life support,” said James Lucier, an analyst for the firm.

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