Biden asked lawmakers to adopt the tentative deal announced in September “without any modifications or delay — to avert a potentially crippling national rail shutdown” and added that up to 765,000 Americans “could be put out of work in the first two weeks alone.”

House Speaker Nancy Pelosi said lawmakers would take up legislation this week “to prevent a catastrophic nationwide rail strike, which would grind our economy to a halt.”

On Monday, more than 400 groups called on Congress to intervene in the railroad labour standoff that threatens to idle shipments of food and fuel and strand travelers while inflicting billions of dollars of economic damage.

A rail traffic stoppage could freeze almost 30 per cent of U.S. cargo shipments by weight, stoke inflation and cost the U.S. economy as much as $2 billion per day by unleashing a cascade of transport woes affecting the energy, agriculture, manufacturing, healthcare and retail sectors (all figures US$).

“A rail shutdown would devastate our economy,” Biden said. “Without freight rail, many U.S. industries would shut down… Communities could lose access to chemicals necessary to ensure clean drinking water. Farms and ranches across the country could be unable to feed their livestock.”

Biden hailed the contract deal that includes a 24 per cent compounded wage increase over a five-year period from 2020 through 2024 and five annual $1,000 lump-sum payments.

Workers in four unions have rejected the tentative deal, while workers in eight unions have approved it.

Labor Secretary Marty Walsh, Transportation Secretary Pete Buttigieg and Agriculture Secretary Tom Vilsack have been involved in discussions with the rail industry, unions and agriculture industry stakeholders.

Senator Roger Wicker, the top Republican on the U.S. Senate’s commerce committee, praised Biden’s call to Congress to act and said no one side was fully happy with the compromise contract deal “but the responsible thing to do is avoid the strike.”

The Association of American Railroads said “congressional action to prevent a work stoppage in this manner is appropriate… No one benefits from a rail work stoppage — not our customers, not rail employees and not the American economy.”

In a letter on Monday, the U.S. Chamber of Commerce, National Association of Manufacturers, National Retail Federation, American Petroleum Institute, National Restaurant Association, American Trucking Associations and other groups warned that impacts of a potential strike could be felt as soon as Dec. 5.

Biden said Congress “should set aside politics and partisan division and deliver for the American people. Congress should get this bill to my desk well in advance of Dec. 9 so we can avoid disruption.”

“The risks to our nation’s economy and communities simply make a national rail strike unacceptable,” says the letter to congressional leaders first reported by Reuters, warning a strike could halt passenger railroad Amtrak and commuter rail services that “would disrupt up to seven million travelers a day.”

Biden’s Presidential Emergency Board in August released the framework for the tentative deal forged in September between major railroads and a dozen unions representing 115,000 workers.

Those carriers include Union Pacific, BNSF, CSX, Norfolk Southern and Kansas City Southern (KCS). Canadian National Railway (CN) and the unions representing its U.S. employees are also parties to the bargaining; Canadian Pacific Railway (CP) and its U.S. employees are not.

Unions and railroads have until Dec. 9 to resolve differences. If they do not, workers could strike or railroads could lock out employees — unless Congress intervenes. But railroads would halt hazardous materials shipments at least four days ahead of a strike deadline.

— David Shepardson is a Reuters correspondent covering the U.S. transportation sector from Washington, D.C.

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“It is very important, very vital, and very urgent that we hear the perspectives from the CEOs at these companies and get the full picture of why prices have gone up for consumers and down for ranchers,” Scott, a Democrat from Georgia, said in a statement.

“In addition to this panel of CEOs, we will be convening a panel of ranchers to hear what consolidation in the beef industry has done to their bottom lines and viability,” he added.

Increased prices and profits for meatpacking companies have threatened to amplify Washington’s scrutiny of the U.S. meatpacking industry, as the Biden administration has criticized a lack of competition in the sector.

U.S. President Joe Biden announced a plan in January for new rules to bolster competition and stop “exploitation” in the sector amid concerns that a small group of meat packers was capable of dictating beef, pork and poultry prices, adding to inflation pressures caused by rising labour and transportation costs and by COVID 19-related supply constraints.

In January, the chairman of the House of Representatives subcommittee on economic and consumer policy sent a letter to major U.S. meat processing companies, seeking information on rising prices and profits.

— Reporting for Reuters by Kanishka Singh in Washington, D.C.

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The Cannabis Administration and Opportunity Act floated by Senate majority leader Chuck Schumer, finance chairman Ron Wyden and New Jersey Senator Cory Booker, would expunge federal non-violent marijuana crimes, further medical research and allow cannabis companies access to essential financial services.

While adult use of cannabis is legal in 18 states, and allowed medically in 37 states, it remains illegal under U.S. federal law, deterring banks and others from dealing with companies that sell marijuana or related products.

The draft set the minimum age required to buy cannabis at 21 and limited retail sales transactions at the state level to 10 ounces of cannabis at a time or the equivalent amount of any cannabis derivative.

The draft also states that a new definition of cannabis would be established and proposes moving cannabis oversight to the Food and Drug Administration and regulators that overlook alcohol and tobacco, away from the Drug Enforcement Administration.

States will control the possession, production, or distribution of cannabis, the draft says, while shipping marijuana into states that have not legalized it will be prohibited. However, such states can not stop shipments going to other legalized regions through their borders.

Senator Chuck Grassley, the top Republican on the Judiciary Committee, said “This new bill puts the cart before the horse.” He added that marijuana use needs more research.

A final legislative draft will be introduced later and feedback on the discussion draft can be provided until Sept. 1.

To become a law, the measure will have to pass both the Democratic-controlled Senate and House of Representatives and be signed by President Joe Biden.

“It is hard to see how this can pass, but nonetheless it is positive to see progress and momentum,” said Greg Heyman, founder of cannabis investment firm Beehouse Partners.

A major cannabis banking reform bill that was approved by the U.S. House of Representatives in April has failed to make any progress in the Senate.

“Our main concern over this current legislation (Cannabis Administration and Opportunity Act) is around the ability to get it passed in the Senate,” private equity firm Poseidon managing director Michael Boniello said, adding it may hinder other federal cannabis reforms, including the banking act, from being passed in 2021.

— Reporting for Reuters by Arathy S Nair in Bangalore.

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The dispute stems from a 15 billion-real (C$4.6 billion) deal in 2017 for Jackson Widjaja, a member of the second-richest family in Indonesia, which Forbes estimates is worth US$9.6 billion, to take over Brazilian pulp maker Eldorado Brasil Celulose SA.

Widjaja’s pulp business Paper Excellence agreed to buy Eldorado from J+F Investimentos, the Batistas’ holding company which also controls JBS. The deal in now in arbitration in Brazil after the two groups could not complete the second stage of the acquisition.

On Monday, JBS accused Paper Excellence of unleashing a lobbying campaign in the United States against its interests, according to a Brazilian court filing.

JBS said in the filing, made in a civil case in Brazil, that Paper Excellence hired lobbyists to argue against it getting U.S. subsidies meant for farmers suffering from the fallout of the trade war with China, and successfully persuaded some members of Congress to send letters to the Department of Agriculture to withhold payments to it.

The lobbyists also urged investigations into JBS, given the Batista brothers’ confession to bribing almost 2,000 politicians in a Brazilian corruption case, and sought to prevent a U.S. listing by the meatpacker, according to the filing.

In a statement to Reuters, Paper Excellence denied the accusations, and said these are bad faith allegations to “attack the company, its shareholders and workers.”

The company said it is focused on completing the Eldorado deal.

Even so, court documents, lobbying records and interviews with people on both sides of the dispute show Widjaja’s Paper Excellence lobbied against JBS in the U.S. following their dispute over the Eldorado deal.

The lobbying has raised pressure on the Batista brothers, who are still waiting for a final decision of Brazil’s Supreme Court expected in June on whether their plea deal and immunity from prosecution should be annulled or maintained.

Over the past few months, some lawmakers have written letters to the Trump administration asking for an investigation into JBS and subsidy payments to it. Reuters could not determine whether those letters were a result of lobbying by Paper Excellence.

A JBS executive told Reuters the company is proceeding with its plans to list its international operations in the United States, but without raising new money from investors.

JBS’s Brooks, Alta. beef packing plant, one of Canada’s largest, is among the JBS operations that have been expected to be included in such an IPO.

The initial IPO plans, drafted four years ago, have failed because of a veto from Brazil’s development bank BNDES, and difficult market conditions. BNDES is a shareholder in JBS.

The executive denied that the changes in the listing plans were a result of the lobbying pressure, and said the company expects the transaction in the first half of the year.

JBS declined to comment on the IPO and the U.S. lobbying.

Deal turns south at the Ritz

A turning point in the relationship between Widjaja and the Batistas was an August 2018 meeting. By then, Widjaja had bought 49 per cent of Eldorado and the two sides were meeting at the urging of a Brazilian judge to negotiate terms for the remainder of the business.

At the meeting at the Ritz Carlton hotel in Los Angeles, the Batistas’ representatives said the company’s value had changed since they first signed the deal and the price should be higher, if six more months were required to close the deal, according to an audio recording of the meeting reviewed by Reuters. Widjaja can be heard saying the new valuation numbers were “shocking.”

After the meeting Widjaja told Claudio Cotrim, his top Brazil executive, he would rather “spend millions on lawyers than give them (Batistas) another cent,” Cotrim said.

In a statement to Reuters, J+F said it did not ask for additional money within the original contract.

Paper Excellence designed a strategy with three pillars to counter the Batistas once it was clear that there would be litigation, Cotrim said. The first was the arbitration, which should have a decision by August. The second was appointing executives to the board of Eldorado during the arbitration period. The third involved a public relations campaign, with the hiring of PR firms.

Last year, Paper Excellence hired Jeff Miller, a former Republican Florida Congressman, as a lobbyist, according to lobbying reports to Congress filed in 2019.

Although Paper Excellence has no farming activities in the U.S., Miller’s firm worked in “efforts related to subsidies in 2018 farm bill benefiting foreign companies” and “USDA trade mitigation benefiting foreign companies,” according to lobbying records.

Paper Excellence declined to comment on why it hired Miller.

Last month, Miller joined another Washington lobbying firm, Mercury Public Affairs, known for lobbying for companies such as China’s ZTE and firms owned by Russian oligarch Oleg Deripaska. Mercury said Miller did not bring his contract with Paper Excellence to his new employer.

But since last December, Mercury’s co-chairman and former Louisiana senator David Vitter, has been lobbying House congressional aides asking for an investigation of the JBS listing in the United States, alleging potential risk to investors, according to emails reviewed by Reuters and confirmed by Mercury.

In Monday’s court filing, JBS alleged that Mercury was hired indirectly by Paper Excellence but did not offer proof.

Paper Excellence and Mercury deny the allegation.

— Tatiana Bautzer reports on Brazil’s financial sector for Reuters from Sao Paulo.

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The new clause would, in theory, checkmate a move made last summer by some Democrat members of the U.S. House of Representatives to have a new North American free trade pact revive the COOL meat-labeling program the Obama administration halted in 2015.

The three countries signed off on revisions made to the 2018 CUSMA pact at a Dec. 10, 2019 ceremony in Mexico City. The House of Representatives on Dec. 19 passed the revised version of CUSMA by a 385-41 vote. The deal is now before the U.S. Senate for consideration.

The revised CUSMA, as passed in the House, does include several other changes that had been sought by the House’s Democrat majority in the year since the Trump administration reopened and secured changes to the 36-year-old NAFTA pact.

Mexico’s Senate has already approved the revised pact, which still must also pass Canada’s Parliament.

In a statement via email on Dec. 19, an Agriculture and Agri-Food Canada spokesperson said Ottawa “will continue to defend Canadian agricultural producers against any discriminatory labelling requirements that may contravene international trade obligations.”

That said, the AAFC spokesperson also noted the new CUSMA pact as approved by the House of Representatives “contains language that prohibits discriminatory labelling requirements.”

The revised pact’s text requires each party to the CUSMA deal to ensure regulations on labels “accord treatment no less favourable than that accorded to like goods of national origin.”

Any rules on labeling that the CUSMA nations impose in the future also must “not create unnecessary obstacles to trade between the parties.”

The revised CUSMA pact specifies that the language on labeling is included “in order to avoid disrupting North American trade” and is in keeping with the three countries’ obligations on technical barriers to trade (TBT).

The chance of a COOL law turning up in CUSMA appeared last summer when a group of House Democrats — among them high-profile rookie members such as Ilhan Omar, Rashida Tlaib , Conor Lamb and Alexandria Ocasio-Cortez — wrote jointly to U.S. Trade Representative Robert Lighthizer about CUSMA in June.

Their letter sought COOL’s revival as part of CUSMA, along with other changes to the pact’s labour, environment and pharmaceutical provisions.

Lost sales

COOL wasn’t part of the original NAFTA but was developed during the Clinton administration, passed near the end of the George W. Bush administration in 2008 and implemented during the Obama administration in 2009.

COOL imposed mandatory origin labels for beef, pork, lamb, chicken and goat meat and certain other perishable commodities where sold at retail in the U.S.

Canada and Mexico challenged COOL through U.S. courts and the World Trade Organization, because its rules, strictly applied, called for U.S. processors of meat from imported animals to provide labels that detailed where the specific animals involved were born, raised and slaughtered.

The costs involved in segregating animals and production lines to follow the label law prompted some U.S. packers and processors to restrict or halt their imports or cut the prices they paid for Canadian cattle and hogs.

Some estimates pegged Canadian cattle and hog producers’ losses to reduced prices and lost sales at over $8 billion.

After the WTO ruled in 2015 that COOL violated the United States’ international trade obligations, the Obama administration opted to repeal the label rules on beef and pork rather than face retaliatory tariffs from Canada and Mexico on U.S. goods. — Glacier FarmMedia Network

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The 500-year-old tradition of cockfighting in Puerto Rico was due to end on Friday under a law passed by Congress last year to bring the island in step with prohibition in every U.S. state.

But Puerto Rico Governor Wanda Vazquez on Wednesday signed legislation designed to allow cockfighting to continue. That could set up a conflict with U.S. federal authorities.

Puerto Rican fans see cockfighting as part of their cultural heritage and say 27,000 jobs could be lost among breeders, food suppliers and others if the ban goes ahead.

They bristle at being ordered to end fights by Congress, where the island’s three million people have no elected voting representative.

“This is an abuse the U.S. government is committing against our culture,” said fighting cock owner Carlos Junior Aponte Silva.

Animal rights groups say cockfighting is cruel.

The birds have spikes attached to their legs by owners to cause more damage to opponents as men gather around a pit to watch the combatants peck and scratch each other in 12-minute fights. The death of cocks during a bout or shortly afterward is common.

The cocks’ lives are miserable even without fighting, says the People for the Ethical Treatment of Animals (PETA) group.

“Many of these birds spend most of their lives tethered by one leg near whatever object is intended to serve as their shelter, such as an overturned plastic barrel or a small wire cage placed directly on the ground,” PETA says on its website.

With Puerto Rico’s economy suffering from a debt crisis and the effects of devastating hurricanes in 2017, breeders say they are prepared to go underground if need be.

“If there’s nothing before (December) 21st, well then we’ll continue fighting cocks… we will become criminals,” said part-time breeder Elvin Lugo.

While it is not clear how the issue will be resolved, the legislation signed by Vazquez also urges negotiations between Puerto Rico and Congress for a five-year moratorium on the ban.

It also prohibits the trade of fighting cocks between the island and the rest of the United States to ensure there would be no breach of interstate commerce laws if cockfighting continued.

— Reporting for Reuters by Ricardo Ortiz and Luis Valentin; writing by Alistair Bell.

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The signing ceremony in Mexico City launched what may be the final approval effort for U.S. President Donald Trump’s three-year quest to revamp the 1994 North American Free Trade Agreement (NAFTA), a deal he has blamed for the loss of millions of U.S. manufacturing jobs.

The event at the National Palace was attended by Mexico President Andres Manuel Lopez Obrador, Canadian Deputy Prime Minister Chrystia Freeland, U.S. Trade Representative Robert Lighthizer and U.S. White House adviser Jared Kushner.

The result of a rare show of bipartisan and cross-border co-operation in the Trump era of global trade conflicts, the deal was inked the same day as he became the fourth U.S. president in history to face formal impeachment.

Lighthizer called it “a miracle” that actors from across the political spectrum had come together, calling it a testament to the benefits of the deal. Lopez Obrador credited Trump for working with him, while Freeland celebrated a win for multilateralism.

“We have accomplished this together at a moment when, around the world, it is increasingly difficult to get trade deals done,” she said.

The U.S.-Mexico-Canada Agreement (CUSMA) was signed more than a year ago to replace NAFTA, but Democrats controlling the U.S. House of Representatives insisted on major changes to labour and environmental enforcement before bringing it to a vote.

Delays, led primarily by Democrats and U.S. organized labour, at times threatened to scuttle the deal, creating investment uncertainty in all three countries and worrying U.S. farmers already suffering tariffs stemming from Trump’s trade war with China.

Intense negotiations over the past week among Democrats, the Trump administration and Mexico produced more stringent rules on labour rights aimed at reducing Mexico’s low-wage advantage, including verification of labour compliance at the factory level by independent labour experts.

“It is infinitely better than what was initially proposed by the administration,” House Speaker Nancy Pelosi told a news conference, adding that CUSMA was now ready for a House vote.

Some Mexican business groups fear that Lopez Obrador and his chief negotiator, Deputy Foreign Minister Jesus Seade, have ceded too much, and call the labour verification a violation of Mexican sovereignty.

Seade himself, who signed the deal on Tuesday, said some of the changes were reasonable but not necessarily “good for Mexico.”

Next “they’ll cede the Isthmus of Tehuantepec,” said Gustavo Hoyos, president of employers federation Coparmex and a vocal Lopez Obrador critic, referring to a strategic region of Mexico. He called the government “a bad negotiator.”

Republican and Democratic U.S. lawmakers say there is broad support for revising the trade pact, which encompasses US$1.2 trillion in annual trade across the continent and supports 12 million U.S. jobs and a third of American agricultural exports, backers say.

U.S. House ways and means committee chairman Richard Neal, a Democrat, said sections of the text would be reviewed by lawmakers, but he saw no reason for “unnecessary delays” in bringing the trade pact to a vote on the House floor.

However, in a new wrinkle to swift ratification in the United States, U.S. Senate Majority Leader Mitch McConnell said the Republican-controlled Senate would not take up the deal before congressional recess, potentially pushing the vote into next year.

That seemed to put him at odds with Trump spokeswoman Stephanie Grisham, who said the White House would “push hard” to get the implementing bill passed before year-end.

Trump launched a renegotiation of NAFTA in his first year in office, intent on delivering on his 2016 campaign promise to replace what he has derided as the “worst deal ever.” Canadian and Mexican leaders reluctantly agreed to join the negotiations with their largest trading partner.

“America’s great USMCA Trade Bill is looking good. It will be the best and most important trade deal ever made by the USA. Good for everybody,” Trump tweeted on Tuesday. “Importantly, we will finally end our Country’s worst Trade Deal, NAFTA!”

For Democrats, the deal serves as a retort to Trump’s and Republicans’ assertions that their only agenda was pursuing his impeachment.

In addition to the labour provisions, Democrats said they won elimination of a 10-year data exclusivity period for biologic drugs from the agreement, which they feared would lead to higher U.S. drug prices.

But Pelosi said she lost her bid to remove liability protections for internet service providers, a provision she had called a “giveaway” to big tech companies.

U.S. Trade Representative Lighthizer included a last-minute demand of Mexico for a tighter definition of steel and aluminum in CUSMA’s automotive rules of origin to be “melted and poured” in North America. While CUSMA originally required 70 per cent of the metals used in North American vehicle production come from the region, it did not specify production methods, opening the door to the use of semi-finished metals from China and elsewhere.

Mexico and Canada agreed to a seven-year phase-in of the new standard for steel, industry sources familiar with the deal said. The aluminum demand was dropped, but with the caveat that it would be reconsidered in 10 years.

— Reporting for Reuters by Andrea Shalal and Sharay Angulo; additional reporting by David Lawder in Washington and Abraham Gonzalez and Daina Beth Solomon in Mexico City; writing by Dan Burns.

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A $1-per-gallon subsidy that had been propping up the industry since 2005 lapsed at the beginning of 2018 due to Congressional inaction, and his hopes for a swift renewal had been declining along with his business ever since (all figures US$).

“I didn’t (lay off my workers) because they failed,” said Whittington, co-owner of Integrity Biofuels at Morristown, about 30 km east of Indianapolis. “To me, the support systems of the industry have failed.”

Integrity Biofuels’ shutdown marks the tenth biodiesel facility to have idled this year after the lapse in the biodiesel credit, putting about 250 people out of work, according to the National Biodiesel Board (NBB). Nationwide production has decreased about 10% year-on-year, according to Energy Information Administration data.

The biodiesel credit was part of a broad legislative effort more than a decade ago to help farmers and reduce petroleum imports by supporting biofuels. At a cost of nearly $2 billion per year, it is among the most expensive U.S. energy subsidy programs.

Its lapse has added pressure on Midwest farmers, a key constituency in the 2020 presidential election already struggling under poor planting conditions and the fallout from the U.S.-China trade war.

In August, some 90 U.S. facilities produced 156 million gallons of the fuel — made from agricultural oils, recycled cooking oil and animal fats — from 172 million gallons a year earlier, according to the U.S. Energy Information Administration. Other plants that have cut production include facilities run by players such as Flint Hills Resources, World Energy and REG.

In recent weeks, industry associations, biodiesel producers and lawmakers seeking to prevent further shutdowns and layoffs have packed pressure on Congressional leadership to renew the so-called Biodiesel Blenders Tax Credit for buyers of the fuel.

On Thursday about 140 companies and organizations sent a letter to House and Senate leadership, urging them to extend the credit before the end of the year.

“Producers are now cutting back production, purchases of raw materials, and deliveries of renewable fuel to consumers, which will have impacts across the economy,” the letter said.

The industry’s advocates want the biodiesel credit to be included in a government funding package to be passed before the end of the year. Whether the credit is included is up to House and Senate lawmakers negotiating it, a House Democratic aide said. In the past Congress has retroactively renewed it with sweeping bipartisan support.

But this lapse has been longer than ever. The government shutdown late last year diverted Congress’ attention from addressing the issue, said Paul Winters, a spokesman for the NBB industry group. Biodiesel groups argue this has thrown confusion into future supply contracts and tightened credit lines.

“A lot of companies have been hanging on by their fingernails,” Winters said.

Republican Senator Chuck Grassley of Iowa, a biodiesel advocate who serves as chairman of the Senate Finance Committee, said the renewal has been complicated by a general decrease in bipartisanship in legislative negotiations.

Industry players worry Congressional impeachment proceedings against President Donald Trump will further reduce the chances of a renewal.

“A lot of us are fearful,” said Michael McAdams, president of the Advanced Biofuels Association.

— Stephanie Kelly reports on the U.S. oil and fuel sectors for Reuters from New York.

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Foreign Minister Chrystia Freeland presented what’s known as a ways and means motion to the House of Commons, which opens the way for formal presentation of a bill.

The U.S. struck deals on May 17 to lift tariffs on steel and aluminum imports from Canada and Mexico, removing a major obstacle to legislative approval of the new U.S.-Mexico-Canada Agreement (USMCA), the trilateral trade deal to replace the 25-year-old North American Free Trade Agreement.

Pence is going to meet Prime Minister Justin Trudeau in Ottawa on May 30 to discuss “advancing” ratification.

“The entry into force of this agreement does not depend solely on Canada,” Freeland told reporters after presenting the motion. “Insofar as possible, we intend to move in tandem with the United States.”

The U.S. is Canada’s top trading partner, taking in 75 per cent of its goods exports. Reaching a new trade deal had been a priority for Trudeau’s Liberal government, and now a national election is just five months away.

Some U.S. Democrats have come out against ratifying the trade agreement. While Freeland has said the government is “full steam ahead” on ratification, she would not say on Monday whether the government would push to get it done before parliament goes into recess ahead of the vote.

John Manley, a former Liberal foreign minister, said Friday that Canada should pass the new treaty this summer.

“To fail to pass it is going to be a signal to the U.S. Congress that it is still open for renegotiations,” Manley told Reuters.

Some U.S. lawmakers have said passing the treaty would become more difficult after the congressional summer recess due to budget battles and increased campaigning ahead of the November 2020 presidential election.

— Reporting for Reuters by Kelsey Johnson and Steve Scherer in Ottawa.

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The ITC report is a crucial step in the push for Congress to consider ratification of the U.S.-Mexico-Canada Agreement, which was signed by President Donald Trump and the leaders of the other two countries last year to replace the 25-year-old North American Free Trade Agreement.

The report estimates that annual U.S. real gross domestic product would increase by 0.35 per cent, or US$68.5 billion, on an annual basis compared to a NAFTA baseline, and would add 176,000 U.S. jobs, while raising U.S. exports.

The ITC’s estimates are for year six of the trade deal, once it is fully implemented.

The trade deal’s success or failure in Congress could be determined by how it is expected to affect the U.S. auto industry, a sector that steadily drained jobs to Mexico under NAFTA. The USMCA deal contains much tighter regional content rules, requiring that 75 per cent of a vehicle’s value be sourced in North American versus 62.5 per cent currently, and 40-45 per cent produced in high-wage areas, namely the U.S. and Canada.

Auto industry employment would rise by 30,000 jobs for parts and engine production, but U.S. vehicle assembly would decline. U.S. vehicle prices would rise up to 1.6 per cent, causing consumption to fall by 140,000 units per year, or about 1.25 per cent of 2017 sales, the report said.

The report overall was more positive than initially anticipated by economists, who said the traditional economic models used by the ITC to measure previous trade deals would result in minimal gains for the United States.

White House economic adviser Kevin Hassett told Reuters that he was pleasantly surprised by the results, which used different modeling methods that he called “accurate and well done.”

“Their estimate is a lot closer to what we think USMCA will do than I expected,” Hassett in a telephone interview. “This is very strong argument for passing the USMCA.”

Concerns not alleviated

But some key Democrats were not swayed from their demands for improvements to the enforcement of new labour standards before they consider USMCA. Democrats control the U.S. House of Representatives.

Representative Earl Blumenauer, chairman of the House ways and means trade subcommittee, said that he had already believed the trade deal needed changes before it could be considered by the House. “Nothing in this report alleviates those concerns,” he said.

Senator Ron Wyden, the top Democrat on the Senate finance committee, said, “The administration shouldn’t squander the opportunity to lock in real, enforceable labour standards in Mexico.”

The ITC report said Mexican union wages would rise by 17.2 per cent if the labour provisions agreed in the USMCA are enforced. Even so, Mexican factory wages would remain far below those in the U.S.

Republican Senator Chuck Grassley, chairman of the Senate finance committee, praised the report for highlighting benefits beyond tariff reductions.

“Many of the significant improvements in USMCA are reducing non-tariff barriers and implementing rules and fair practices that will help U.S. workers, jobs and businesses tremendously over the coming years,” Grassley said in an emailed statement.

Dueling analyses

The U.S. Trade Representative’s office had prepared a separate analysis of USMCA’s automotive benefits that industry officials had described as a rosier alternative view of USMCA aimed at limiting any potential damage from the ITC report.

USTR estimated that the trade deal would create 76,000 automotive sector jobs within five years as automakers invest some $34 billion in new plants to comply with the regional content rules. The total includes about $15 billion in projects already announced.

USTR officials said their analysis was based on plans disclosed by automakers to the trade agency for compliance with the new agreement’s tighter rules of origin.

“They have verbally committed to us that they intend to comply with the rules,” a senior USTR official said. “And they have told us that this is not going to have significant upward pressure on vehicle prices.”

But the ITC report said some automakers may decide not to offer vehicles that would be too expensive to bring into compliance with the deal, reducing consumer choice in the U.S. auto market.

The trade group representing Detroit automakers Ford, GM and Fiat Chrysler said it viewed the USTR analysis as more accurate than the ITC’s.

The ITC “underestimates the longer-term investments and increased U.S. auto parts sourcing that will be made in our sector as a result of the certainty and predictability the USMCA will deliver,” Matt Blunt, president of the American Automotive Policy Council, said in a statement.

The USMCA deal will also lead to new access for U.S. exports of dairy, poultry and egg products to Canada and U.S. imports of sugar and sugar-containing products from Canada, the ITC said.

The ITC’s forecast estimated total U.S. dairy product output would increase by $226.8 million, or 0.1 per cent. U.S. agriculture and food exports overall would increase by $435 million.

Nebraska farmer Lynn Chrisp, president of the U.S. National Corn Growers Association, cautioned that ITC reports typically measure economic impact of “new” trade agreements and focus on market access.

Since the original NAFTA deal already eliminated most tariffs on exports of U.S. food and agriculture products, he said in a release, the ITC’s report “doesn’t fully capture the economic benefits of trade with Canada and Mexico, nor the improvements to trade rules in USMCA that benefit agriculture.”

The benefits of USMCA “make it clear why Congress must immediately ratify” the deal, Association of Equipment Manufacturers president Dennis Slater said in a separate release. The AEM represents North American farm, construction and off-road equipment makers.

Ratification, he added, “must also come with the immediate removal of all tariffs — which continue to hurt the U.S. economy and risk the many benefits of free and fair trade.”

— Reporting for Reuters by David Lawder and David Shepardson in Washington; additional reporting and writing by Chris Prentice in New York. Includes files from Glacier FarmMedia Network staff.

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