The Battle Over NAFTA 2.0 Has Just Begun

Progressives must fight strategically to improve it—if they don’t, the consequences could be devastating.


After over a year of renegotiations of the North American Free Trade Agreement by the United States, Canada, and Mexico, the NAFTA 2.0 textsigned on November 30 revealed improvements for which progressives have long campaigned, the addition of damaging terms that we oppose, and critical unfinished business.

It’s no surprise that the administrations of Donald Trump, Justin Trudeau, and Enrique Peña Nieto failed to deliver a transformational replacement for the corporate-rigged trade-pact model that NAFTA hatched in the early 1990s. But if progressives secure swift and certain enforcement of the agreement’s new labor standards—and succeed in incorporating some other key improvements—the final package that will head to Congress in 2019 could end some of NAFTA’s continuing, serious damage to people across North America. And that would be a big deal.

The status quo, with NAFTA helping corporations outsource more US jobs to Mexico every week after nearly 1 million have been government-certified as lost to NAFTA, is not acceptable. Nor are the ongoing Investor-State Dispute Settlement (ISDS) attacks on environmental and health safeguards, or the corporate exploitation of Mexican workers, who today face $1.50-an-hour manufacturing wages that are unlivable and lower in real terms than before NAFTA. Neither withdrawing from NAFTA nor maintaining NAFTA 1.0 will raise wages in Mexico, which must be done to stop the offshoring that transforms middle-class jobs into sweatshop jobs.

This explains why congressional progressives, unions, groups like Public Citizen, and others who have fought decades of bad trade deals did not respond to the signing ceremony with an opposition campaign, but rather with demands for further improvements. Thanks to the midterm elections, only a version that can win significant Democratic support will get through Congress. That creates an opportunity we must seize. The signing of the NAFTA 2.0 text was just one step in a long process. Phase two of the battle to replace NAFTA has begun.

Trump’s claim to have created a totally different kind of agreement is a deceitful sales pitch, similar to those used for decades by US presidents to hawk previous trade deals. No one should refer to NAFTA 2.0 by using Trump’s preferred “US-Mexico-Canada Agreement” (USMCA) rebrand.

The NAFTA 2.0 framework, like previous agreements, sets limits on domestic consumer safeguards and grants protectionist monopoly rights to Big Pharma. Appallingly, the 164 countries that are members of the World Trade Organization—including the United States, Mexico, and Canada—are captured under this regime, NAFTA or not.

But “free trade” agreements like NAFTA include corporate goodies, like ISDS, that extend beyond the WTO rules. This is why fighting for improvements to NAFTA 2.0 matters. Analyses by unions and Public Citizen provide a road map for the improvements still needed.

On the upside, NAFTA’s outrageous investor privileges and ISDS tribunals are dramatically reined in under NAFTA 2.0, after hundreds of millions in taxpayer funds have been paid to corporations using the regime to attack public-interest policies. The new text terminates ISDS tribunals between the United States and Canada, which will prevent significant future damage. Most ISDS cases under NAFTA have involved US or Canadian corporations attacking the Canadian or US government, and all but one of the ISDS payouts over environmental issues involved US firms challenging Canadian policies.

For Mexico, ISDS is replaced by a new approach: Whereas ISDS allows investors to skirt domestic courts, the new process requires investors to use such courts to resolve disputes with a government until the highest available domestic court rules, or until two and a half years pass with no resolution. In the latter case, an investor can seek compensation—but only for limited claims in which “an investment is nationalized or otherwise directly expropriated through formal transfer of title or outright seizure,” or for discriminatory government actions against an established investment.

The five other investor protections in NAFTA that have resulted in almost all payouts so far are eliminated in the new agreement. These are also the protections that made it cheaper and less risky to outsource US jobs to Mexico. Additionally, NAFTA 2.0 eliminates the “right to invest,” which companies use to launch ISDS attacks if a government refuses to authorize an environmentally damaging mine or other proposed investment.

The new text also includes important procedural reforms. Those reviewing claims under NAFTA 2.0 cannot simultaneously represent corporations suing governments, which is not the case under the ISDS process. Also, investors can only be compensated for losses they can prove, with “inherently speculative” damages banned; previously, investors have obtained huge sums premised on their claims that expected future profits would be lost.

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