ILMA Compoundings – November 2019 - 45

WASHINGTON LANDSCAPE

USMCA and You
By Matthew Levetown

B

y time you're reading this,
hopefully the United StatesMexico-Canada Agreement
(USMCA) is ratified and is on its way
to implementation. If so, consider
this a quick summary of why it took
Congress so long to ratify and of some
of the benefits to U.S. businesses.
On the off chance that the debate
rages on in Congress, I can shed some
light behind the numbers and how
the USMCA can empower North
American manufacturers in the midst
of intercontinental trade disputes.
WHY THE HOLDUP?
Depending on where information
about the North American Free Trade
Agreement (NAFTA) replacement
comes from, the deal negotiated between
Canada, Mexico and the U.S. is either
NAFTA in an emperor's new clothes or
a genuine update to bring free trade into
the 21st century. Aside from the partisan
issue of handing President Donald Trump
a win on trade, congressional Democrats
voiced four primary concerns: labor and
environmental provisions, pharmaceutical
costs and enforcement of the deal.
While the environmental, labor
and enforcement topics are of major
interest to manufacturers, some quick
words are warranted on the topic of
drug pricing to square the bases. The
USMCA requires Mexico and Canada
to increase the exclusivity period for
biologic drugs to 10 years. Given that
biologics currently represent 40% of
the total prescribed drug expenditure
but only 2% of prescriptions, prices
would likely increase. However, Congress has already introduced two bills
to control prescription drug pricing

in the U.S., and prescription pricing
in different insurance systems is a
national issue.
What labor and environmental
reforms Democrats desire is not wholly
clear. In recent months, Mexico has
passed or vowed passage of labor laws
expanding union freedoms and increasing wages, in some cases due to pressure
from Democrats. USMCA's new rules
of origin for automobile manufacturing
require that at least 40% of a vehicle be
made by workers earning at least $16
USD per hour,1 and other provisions
that avoid unfair labor practices.
On the environmental front,
the USMCA has chapters obliging
signatories to protect biodiversity,2 the
ozone layer and forestry. Additionally,
countries must commit to improving
environmental protections3 and cannot
weaken existing rules to steal trade.4
Enforcement of the USMCA so that
U.S. workers are protected is an important issue. NAFTA's dispute mechanism
resulted in only three enforcement decisions in 25 years. Unlike NAFTA, which
required the affirmative reappointment
of panelists after three and led to
blocking enforcement panel formation,
the USMCA requires that the rosters,
once set, remain in place until either
the USMCA expires or a new roster
is selected.5 If political pressure can be

used to submit the roster, the USMCA
already has stronger enforcement rules.
More enforcement agreements can be
sought if needed at USMCA's mandatory review in six years, and Mexican
officials have already told House Democrats that they won't accept any more
enforcement provisions at this time.
WE'RE MISSING OUT
Delaying the USMCA's ratification
prevents positive trade changes.
Minimally, passage of USMCA should
stabilize currency and market fluctuations caused by existing trade disputes.
Thousands of U.S. small and medium
business entities (SMEs) rely on trade
with Canada and Mexico, and 39 states
consider either country to be a top
trading partner. In total, one-third of
all U.S. goods exports are purchased in
Canada and Mexico.
Canada and Mexico are the top
two trade destinations for U.S. SMEs,
and the USMCA contains a separate
chapter on SMEs. Importantly, under
USMCA, SMEs are no longer required
to open a foreign office to engage
in trade and compels signatories to
consider the impact on SMEs when
crafting regulations. Additionally, the
chapter covers the creation of an SME
council to explore trade, education and
investment opportunities.
Continued on page 47

45



ILMA Compoundings – November 2019

Table of Contents for the Digital Edition of ILMA Compoundings – November 2019

LETTER FROM THE CEO
INSIDE ILMA
WHAT’S COMING UP
INDUSTRY RUNDOWN
In the Know
International Insight
Market Report
STRATEGIES FOR THE FUTURE
ENGAGED AND AWARE
BEHIND THE SCENES
BUSINESS HUB
COUNSEL COMPOUND
WASHINGTON LANDSCAPE
IN NETWORK
Member Connections
PORTRAIT
ILMA Compoundings – November 2019 - Cover1
ILMA Compoundings – November 2019 - Cover2
ILMA Compoundings – November 2019 - 1
ILMA Compoundings – November 2019 - 2
ILMA Compoundings – November 2019 - LETTER FROM THE CEO
ILMA Compoundings – November 2019 - INSIDE ILMA
ILMA Compoundings – November 2019 - 5
ILMA Compoundings – November 2019 - 6
ILMA Compoundings – November 2019 - 7
ILMA Compoundings – November 2019 - 8
ILMA Compoundings – November 2019 - 9
ILMA Compoundings – November 2019 - 10
ILMA Compoundings – November 2019 - 11
ILMA Compoundings – November 2019 - WHAT’S COMING UP
ILMA Compoundings – November 2019 - 13
ILMA Compoundings – November 2019 - 14
ILMA Compoundings – November 2019 - 15
ILMA Compoundings – November 2019 - INDUSTRY RUNDOWN
ILMA Compoundings – November 2019 - 17
ILMA Compoundings – November 2019 - 18
ILMA Compoundings – November 2019 - In the Know
ILMA Compoundings – November 2019 - International Insight
ILMA Compoundings – November 2019 - 21
ILMA Compoundings – November 2019 - Market Report
ILMA Compoundings – November 2019 - 23
ILMA Compoundings – November 2019 - STRATEGIES FOR THE FUTURE
ILMA Compoundings – November 2019 - 25
ILMA Compoundings – November 2019 - 26
ILMA Compoundings – November 2019 - 27
ILMA Compoundings – November 2019 - 28
ILMA Compoundings – November 2019 - 29
ILMA Compoundings – November 2019 - 30
ILMA Compoundings – November 2019 - 31
ILMA Compoundings – November 2019 - ENGAGED AND AWARE
ILMA Compoundings – November 2019 - 33
ILMA Compoundings – November 2019 - 34
ILMA Compoundings – November 2019 - 35
ILMA Compoundings – November 2019 - BEHIND THE SCENES
ILMA Compoundings – November 2019 - 37
ILMA Compoundings – November 2019 - 38
ILMA Compoundings – November 2019 - 39
ILMA Compoundings – November 2019 - BUSINESS HUB
ILMA Compoundings – November 2019 - 41
ILMA Compoundings – November 2019 - COUNSEL COMPOUND
ILMA Compoundings – November 2019 - 43
ILMA Compoundings – November 2019 - 44
ILMA Compoundings – November 2019 - WASHINGTON LANDSCAPE
ILMA Compoundings – November 2019 - Member Connections
ILMA Compoundings – November 2019 - 47
ILMA Compoundings – November 2019 - PORTRAIT
ILMA Compoundings – November 2019 - 49
ILMA Compoundings – November 2019 - Cover4
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