Democrats’ House Victory Complicates Passage of New Nafta, Trade Deals

The Trump administration is facing a heated trade battle with Congress after the Democratic Party retook the House of Representatives, posing a significant challenge to President Trump’s deal with Mexico and Canada.

Securing congressional passage of the makeover of the North American Free Trade Agreement will get a lot harder with a split Congress. A Democrat-led House gives Mr. Trump’s political opponents power to demand concessions in exchange for ratification of the new agreement, reached in September and renamed the U.S.-Mexico-Canada-Agreement, or USMCA.

The White House’s new accord with Canada and Mexico, among other things, makes it less attractive for auto makers and other manufacturers to relocate factories to Mexico to leverage cheaper labor costs. Legislators of all three countries must now ratify the deal.

Manufacturing workers, particularly auto workers, are “the biggest winners,” of the renegotiated deal, said Lawrence Kudlow, the Director of the president’s National Economic Council, in an interview.

“If the Democratic Party is truly the party of the blue-collar man and woman,” said Mr. Kudlow, “they will support this deal.”

Democrats will now take control of the House, which is more challenging than the Senate when it comes to passing trade agreements. Many House Republicans, let alone Democrats, are skeptical of trade deals out of concern they surrender U.S. sovereignty or imperil the jobs of blue-collar workers in their districts.

Most Democrats, backed by unions, have voiced skepticism about liberalizing trade unless the deals allow workers in the other countries to take advantage of higher labor standards and wages. Passage “will depend on whether unions will want to push it,” a senior White House official said.

The AFL-CIO, a large federation of labor unions, said in official comments that it has “serious doubts that the improved rules will make a meaningful difference to North American working families without additional provisions.” Several environmental groups have rejected the new agreement.

President Trump has signaled his intentions to continue pursuing his trade agenda, saying in a tweet on Wednesday that he was congratulated on the midterm election results by “foreign nations (friends) that were waiting me out, and hoping, on Trade Deals. Now we can all get back to work and get things done!”

For most presidents, implementing trade agreements typically involves two successive battles: first haggling with trading partners and then lobbying lawmakers to vote in favor of agreements on trade, a politically divisive area that doesn’t respect traditional party lines.

A senior White House official said the administration had long anticipated the possibility of a Democratic victory in one or both chambers of Congress, and as a result, U.S. trade representative Robert Lighthizer and his team specifically negotiated provisions that would seem reasonable to both political parties.

Mr. Lighthizer has long signaled an understanding of the need to reach across party lines. “He is going to end up looking like he was a fortuneteller in trying to find a bipartisan balance in Nafta that would let Republicans and Democrats all stay in the conversations,” said Lori Wallach, senior trade expert at the left-leaning watchdog group Public Citizen, and who advises Mr. Lighthizer on some policy issues.

“We are very confident that Congress will approve USMCA,“ said Emily Davis, a spokeswoman for Mr. Lighthizer’s office. ”From the beginning, Ambassador Lighthizer has worked closely with Democrats and Republicans in the House and Senate on the renegotiation of this agreement.”

The U.S. and Canada reached a last-minute deal late on Sept. 30 to revise the North American Free Trade Agreement. We look at what it is and what’s changed. Photo: Getty Images.

Democratic lawmakers complain the new deal doesn’t have strong enough enforcement mechanisms to ensure that Mexico implements tougher the labor rules, which include requirements for allowing fully independent unions with collective bargaining rights to help boost wages.

Mr. Trump was elected in part on a platform of disparaging Nafta for displacing some manufacturing jobs, and has also been highly critical of other U.S. trade agreements. In an interview with 60 Minutes last month, he said the biggest regret of his presidency so far is that he “could have been earlier with terminating the Nafta deal.”

Mr. Trump’s other big legislative push—the 2017 tax law—was crafted and passed with Republicans, giving his administration little experience in working with Democratic lawmakers, many of whom are eager to oppose the president.

Under 2015 trade legislation known as “fast track,” Mr. Trump has the right to submit the USMCA to the House and Senate for an up-or-down vote, with no amendments or procedural delays allowed. But a Democratic House speaker next year could introduce a rule to remove the deal from fast-track consideration, effectively killing it.

In 2008, then-Speaker Nancy Pelosi pushed through a rule to prevent House consideration of the Colombia free-trade agreement negotiated by former President George W. Bush. Her move, which followed a Democratic push for stronger labor rules in trade pacts, won the support of nearly all Democrats—and even a few Republicans—effectively delaying a vote on the Colombia deal until the Obama administration.

As a price for not getting in the way of a vote, the next House Speaker, whether Mrs. Pelosi or another Democrat, could demand changes to USMCA, or even unrelated concessions, congressional aides said.

Mr. Trump still holds leverage. He has repeatedly warned he would withdraw from the current version of Nafta if he doesn’t get a new one. Faced with a choice between Mr. Trump’s USMCA or a withdrawal from the deal, many lawmakers would hesitate to take a hard line.

Beyond the House, the Republican-led Senate may also have some leverage in seeking changes to trade policy to pave the way for a USMCA vote. Many GOP senators have complained about Mr. Trump’s tariffs imposed on steel and aluminum on national-security grounds and his threats to put levies on imports of cars and auto parts.

Marc Short, former White House legislative affairs director, said in an interview the USMCA is a potential casualty of a Democratic victory.

“Democrats in Congress are politically motivated not to deliver a victory for the president on trade,” he said.

Write to William Mauldin at william.mauldin@wsj.com and Vivian Salama at vivian.salama@wsj.com

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