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Mexico Ratifies Trade Pact with U.S., Canada -- Update

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06/19/2019 | 08:15pm EDT

By Anthony Harrup and William Mauldin

MEXICO CITY -- Mexico's Senate overwhelmingly voted for a broad rewrite of trade rules between the United States, Canada and Mexico -- making the nation the first of the three partners to ratify the pact designed to replace the North American Free Trade Agreement.

Senators voted 114-4 with three abstentions on Wednesday to ratify the accord -- rebranded as the U.S.-Mexico-Canada Agreement, or USMCA -- which was signed last November by the heads of state of the three countries. Easy passage of the trade pact by the Mexican lawmakers was widely expected.

"Mexico takes the lead, with clear signs that ours is an open, market economy," Mexico's deputy foreign minister and chief trade negotiator for North America, Jesús Seade, tweeted following the vote. "We trust our partners will soon do the same for the sake of a strong North America, with clear rules, attractive for investment, stable and competitive."

President Trump praised Mexico for ratifying the pact, adding in a tweet: "Time for Congress to do the same here!"

U.S. Trade Representative Robert Lighthizer called Mexico's ratification of the agreement a "crucial step forward."

Mexican approval was welcomed at a time when its economy is in a sharp slowdown.

"Today's ratification of the USMCA by Mexico's Senate is another meaningful step in modernizing this critical trade agreement," said Citigroup Latin America chief executive Jane Fraser. "We applaud the Mexican government for advancing the process and we encourage the legislatures in the U.S. and Canada to finish the ratification."

Both Canada and Mexico began the process of seeking legislative approval of the pact in late May after settling a dispute with the U.S. over steel and aluminum tariffs. Although, the pact's biggest hurdles are expected to come from the U.S. Congress.

The Trump administration, meanwhile, has faced headwinds in getting the U.S. House, controlled by Democrats, to agree on moving ahead with the agreement.

House Speaker Nancy Pelosi (D., Calif.) has expressed concerns about the deal and, first and foremost, is seeking assurances that new labor rules will be enforced in Mexico -- so cheaper labor costs won't prompt companies to transfer U.S. jobs south of the border.

"All of this is too important to rush," Rep. Richard Neal (D., Mass.), chairman of the House committee that oversees trade, said in a hearing Wednesday with Mr. Lighthizer.

To comply with labor provisions in the new trade deal, Mexico earlier this year passed landmark legislation that empowers labor unions to bargain more effectively on behalf of workers and gives workers the right to elect union leaders in direct elections with secret ballots, among other pro-labor changes.

Mr. Lighthizer, backed by U.S. business groups, has sought to hammer out a deal with Congress quickly -- one which could allow some changes to North American trade policy through the U.S. legislation that implements the trade pact. But he added that he doesn't think the text of the agreement with Canada and Mexico needs to be altered.

"Getting this done sooner rather than later is in everybody's interest," Mr. Lighthizer told lawmakers.

Canada hasn't indicated when it expects to vote on ratification, although Prime Minister Justin Trudeau has said it would be in conjunction with the U.S. Mr. Trudeau will discuss the USMCA when he meets with President Trump at the White House on Thursday.

International treaties signed by the executive branch only need Senate approval in Mexico.

Mexico pressed ahead with the ratification despite the U.S. threat of imposing tariffs on all imports from Mexico if its southern neighbor didn't do enough to curb the flow of migrants crossing Mexico to the U.S. border.

Mr. Trump announced the tariff threat on May 30, the same day that Mexican government officials delivered the USMCA text to the Senate.

Mexican President Andrés Manuel López Obrador dispatched a delegation to Washington the next day. After a frantic week of meetings in the U.S. capital, an agreement was reached putting off the tariffs while Mexico took measures to reduce the number of mostly Central American migrants passing through the Latin American nation to the U.S.

Mr. López Obrador insists he wants to avoid confrontation with the U.S., and has stressed the importance of the trade deal to Mexico, which sends 80% of its exports to the U.S.

Mr. Trump has praised Mexico's crackdown on the passage of undocumented migrants, but has also kept open the possibility of applying tariffs in the future if he's not satisfied with the results of the Mexican measures."

The trade pact could "encourage greater investment and help promote growth in the coming years" for Mexico, said Jonathan Terluk, a trade and economic policy analyst at the Empra political risk consultancy in Mexico City.

But he added, "Threats from Trump continue to generate significant concerns this area."

Telis Demos contributed to this article.

Write to Anthony Harrup at anthony.harrup@wsj.com and William Mauldin at william.mauldin@wsj.com

Stocks mentioned in the article
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