By on January 13, 2022

Mexican and Canadian officials have been dropping hints that they’re not all that enthusiastic about the United States-Mexico-Canada Agreement (USMCA) since before Enrique Peña Nieto, Donald Trump, and Justin Trudeau all sat down to sign it in 2018. But just getting to that point required months of formal negotiations that rarely looked to be all that productive.

Sadly, things don’t seem to have changed now that the USMCA is in full effect. Last week, Mexico requested a dispute settlement panel under the terms of the trade pact to help resolve disagreements about the surprisingly contentious automotive content stipulations that determine whether or not vehicles and parts will be slapped with tariffs. Under the previous North American Free Trade Agreement (NAFTA), 62.5 percent of the vehicle’s components had to be sourced from member nations to be considered tax-exempt. In an effort to spur localized production, USMCA increased that number to 75 and not everyone is thrilled with the updated content requirements with Mexico claiming it’s not even sure how to apply them. Canada now intends to formally sign onto Mexico’s complaint against the U.S. over their divergent interpretation of rules. 

According to Automotive News, Mexico and Canada currently favor a “more flexible interpretation of the regulations than the U.S.” which the outlet stated, “sought an overhaul of NAFTA in order to protect U.S. manufacturing jobs.” Canadian Trade Minister Mary Ng said that her nation could be joining Mexico in its formal dispute against the United States on Thursday.

“The interpretation that the United States adopted … is inconsistent with USMCA and the understanding shared by the parties and stakeholders throughout the negotiations,” Ng said in a statement, adding that she would like to see the dispute panel produce a report on the matter by the summer of 2022.

From AN:

Mexican Economy Minister Tatiana Clouthier on Thursday welcomed Canada’s decision to join Mexico in the complaint.

“Happy to hear this,” Clouthier wrote on Twitter. “The regional industry that has been developed for long time has to be defended.”

No one was immediately available for comment at the office of the U.S. Trade Representative.

The election of Joe Biden as president did little to improve trade tensions with Ottawa that had simmered under Trump. A USMCA panel last week said Canada’s dairy practices violated the accord and last month Ottawa launched a challenge against U.S. duties on softwood lumber.

Washington is also unhappy about a proposed Canadian tax on digital services, and reiterated its complaints on Wednesday.

While USMCA tackles a broad range of items, many of which have been subjected to similar complaints, nothing has caused quite as much trouble as the rules pertaining to automobiles. Prior to formal negotiations, former President Donald Trump explicitly stated that the updated deal was designed to supplant NAFTA — with increased localized production and some rebalancing being the two primary goals.

Americans had been arguing the efficacy of the accord, signed during the Clinton administration, for decades. Depending on who weighed in, NAFTA was either the best way to secure trade relations with our nearest neighbors, thereby creating a powerful and cooperative trade bloc or the largest factor in encouraging the continued offshoring of American jobs since 1994.

Trump had even taken the position that NAFTA rules were making the United States uncompetitive and often favored Canada and Mexico, allegedly necessitating a revised trade agreement while the U.S.-China trade war was starting to take shape. But the problem with having a trade deal that favors your neighbors is that they’re probably going to want to keep things that way.

That’s not a slight either. Everyone wants to carve out a better trade deal for themselves and the issue helps explain why everyone is having such a hard time coming together on this. From the perspective of the United States, USMCA existed to rebalance North American trade in a way that served the homeland better. But Canada and Mexico seem to feel differently, with leadership launching assertions that some provisions failed to allot their nations the same flexibility as NAFTA had.

In truth, the newer pact offered a series of large changes providing both up and downsides. USMCA created sweeping protections for Mexican workers that didn’t exist under NAFTA. This has been seen as a victory for human rights, while companies expressed fears that being forced into offering higher pay and benefits will make them far less competitive on the global market. The same was true for provisions designed to keep more production based within the region, rather than exporting labor to Europe and/or Asia. Many saw this as a good thing, while others bemoaned the heightened content requirements for automobiles and provisions to ensure labor came from factories paying at least $16 an hour. Fewer tariffs were good because they helped lower prices for consumers. But additional assurances that factory conditions be met to qualify meant more overhead for manufacturers. Drug companies were also outraged that some of their existing protections were removed under USMCA.

There’s plenty more but you get the idea. Despite everyone going along with the updated trade deal, it wasn’t universally appreciated and the complaints manifesting admit the original negotiation period have failed to dissipate. We’ve even butted heads with lobbyists just for discussing the push to revise UCMCA after its passing. I’m expecting to see more complaints coming from member nations in the months ahead, especially if the economic situation continues to sour. Productivity is down just about everywhere and it’s encouraging finger-pointing. The real trick for regulators will be to accurately determine which complaints are valid and actually capable of being resolved fairly. It’ll be quite the achievement.

[Image: Chess Ocampo/Shutterstock]

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23 Comments on “Canada Joins Mexico in Trade Dispute Against United States...”


  • avatar
    Lou_BC

    “Despite everyone going along with the updated trade deal, it wasn’t universally appreciated and the complaints manifesting admit the original negotiation period have failed to dissipate.’

    The replacement for NAFTA was pushed through so the Cheeto Chief would have a feather in his cap/bad combover.

    One benefit to trade pacts is there are mechanisms that participants must follow to work through disputes. It’s complex but much better than “every man for themselves” negotiations on multiple items of trade. It produces stability. A new trade agreement means all of the players have to adapt to the new rules.

    One of the reasons companies went to Mexico was to exploit cheap labour and lax labour laws. I feel that forcing them to pay better wages and meet higher standards is a good idea. Legislation can stop the race to the bottom and offshoring to places like China. Many will complain about increased costs due to purchasing from higher wage sources. You can’t have it both ways, higher wages typically mean a higher sale price or do you want to keep supporting Chinesium goods?

    • 0 avatar
      Matt Posky

      So you think USMCA is a pointless act pushed through to make Trump look good but you also like what’s in it and think it’s going to help North America?

      • 0 avatar
        Lou_BC

        Um, reread what I said. It is NOT a pointless act. It’s rather valuable BUT was pushed through faster than it should have been to make Rump look better. Other than the automobile concessions, there isn’t anything in it that Canada conceded that wasn’t ALREADY planned under the TPP (TransPacificPartnership).

        • 0 avatar
          IH_Fever

          “it’s good, but wait Trump did it so it’s bad.” Classic

          • 0 avatar
            Lou_BC

            @IH_Fever – it was pushed through faster than it should have been. Rump isn’t bright enough to understand trade. TPP would have been a better approach since it would have been a step in the right direction for hemming in China.

            “it’s good, but wait Trump did it so it’s bad.” Classic”

            Isn’t your reply classic MAGA wing rhetoric?

          • 0 avatar
            IH_Fever

            @Lou- nope, not MAGA. Trump was a selfish politician just like all of them. The hypocrisy of “orange man bad even when he does good, but the left can do no wrong even when they screw up royally” is extremely old at this point. Trump tried to do things that benefitted the USA, and as a citizen of said nation, I appreciate it. I won’t shed a tear for Mexico or Canada. Both of have been wanting more than they give for decades now and love to run down the USA until they need something. I’m sure Joe will find a way to coddle them both in due time though.

          • 0 avatar
            Lou_BC

            “Trump tried to do things that benefitted the USA”
            Really?

            “Both of have been wanting more than they give for decades”
            Economically, ha ha, not even close.

            Countries want what’s best for their populace. with that being said, trade agreements are designed to be mutually beneficial and allow for logical dispute mediation.

  • avatar
    SCE to AUX

    When it comes to “America First”, Uncle Joe is more strident in his policies than his predecessor, but with an extra dose of union.

  • avatar
    Lou_BC

    @SCE to AUX – Joe’s a patriot. Donny boy is a self-serving con man.

  • avatar
    kcflyer

    “Cheeto chief, Orange man, donny boy”. But Brandon is getting old? Right

    • 0 avatar
      EBFlex

      It’s not so much that he’s getting old, it’s the fact his brain is deteriorating at a rapid pace. Just the other day he called the cackling wench president. Even Brandon doesn’t think he’s president

    • 0 avatar
      Lou_BC

      @kcflyer – I don’t care either way. I’ve used Brandon in reference to Ol’ Joe so what’s your point? I’ll stop once everyone else stops.

      • 0 avatar
        kcflyer

        I couldn’t remember if it was you or one of the other Liberal residents of the B&B that was complaining recently about the Brandon moniker being old. So apologies. I think their both horrible. I voted for Trump twice because the other option was more repugnant but I still am not impressed with his personality. His policies on the other hand seemed to make the country better. Until the last year when he caved to the alarmist and started pumping money into peoples pockets instead of allowing the economy and the citizens to work through the virus with as little government intervention as possible. Sadly that cost him the election I think and the Libs have gone full tilt to push these destructive inflationary policies. Got a bit a reprieve today from SCOTUS so at least my heathy 21 year old son who already had covid won’t be forced to choose between his job and a jab. This despite the open court lies from Sotomayor

        • 0 avatar
          Lou_BC

          I agree with the Supreme Court in as much as the government shouldn’t be using OSHA to do its dirty work.

          As far as letting “allowing the economy and the citizens to work through the virus with as little government intervention as possible”, the USA per capita has one of the worst death rates for COVID-19 among democratic 1st world nations.

          Inflation is occurring all around the world so it isn’t driven completely by your government policies.

  • avatar
    EBFlex

    So like little children, Canada and Mexico are unhappy that the playing field was leveled and now they want the wildly unpopular President Brandon to fix it.

    Sorry, no. Our interests are more important than yours. You signed the deal, now live with it.

  • avatar
    mikey

    Ok….We can negotiate …Two tractor loads of Maple Syrup, and as many NHL players you want ..We did give you Shania Wayne, Drake and I’m not sure if Weeknd is a real person. You can keep Justin Bieber ..We have a “no return policy ” on damaged goods.
    We’ll take all the EV’s you can send us …We do require a 300 mile range at minus -25 F…

    PS… We promise to be Polite about it all : )

  • avatar
    IH_Fever

    Sounds like the USA is winning if Mexico and Canada are whining. Who knew fair trade was supposed to benefit the US as well?

  • avatar
    pmirp1

    Canada and Mexico are our friends. The problem is China not those two. I don’t think Branden has the backbone to stand up to any body.

  • avatar
    Heino

    NAFTA is a SHAFTA – Jesse Jackson

  • avatar
    ToolGuy

    Now that the U.S. has officially achieved third-world status, I would really appreciate it if more advanced nations (like Canada and Mexico) could stop picking on us. Thanks in advance. [rides off with middle finger extended]

  • avatar
    Mustangfast

    I don’t get it. They don’t want to build cars with the parts produced in member countries? I fail to see how this is something that would be bad in any way, if a company doesn’t want to make their parts in the US, Canada or Mexico then don’t expect those countries to give your product special treatment.

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