Canada Joins Mexico in Trade Dispute Against United States

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.

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U.S. and Mexico Can't Come Together On Light Vehicle Rules

When the United States abandoned the North American Free Trade Agreement (NAFTA) to embrace the United States-Mexico-Canada Agreement (USMCA), it did so under the premise of crafting a better trade arrangement for itself. Established in 1994, NAFTA created a trilateral trade bloc that encouraged commerce between nations. But critics have accused it of encouraging the offshoring of U.S. jobs and dramatically suppressing wages — particularly within the automotive and manufacturing sectors.

Signed in 2018, and revised the following year, the USMCA was supposed to remedy those issues. But it’s been difficult to get all parties on board, especially when it comes to those persnickety rules of origin that stipulate how much of a vehicle’s hardware needs to be sourced from member nations.

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Auto Lobbyists Attempt to Soften USMCA, Look to White House [UPDATED]

Lobbyists are reportedly seeking to soften the United States-Mexico-Canada Agreement (USMCA) now that there are some new faces in the White House. Signed in 2018, revised in 2019, and effective since 2020, the USMCA sought to restore North America’s manufacturing base with new content requirements and place the United States in a more favorable position than it held under the North American Free Trade Agreement. But industry groups are now claiming that interpretations from government agencies are gumming up the works, and accusing the U.S. of having a different interpretation from what the other nations had originally agreed upon.

“[The USCMA interpretation makes] meeting the … content provisions that much more difficult for everyone to achieve,” stated David Adams, president of Global Automakers of Canada.

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Vehicle Content Rules Still Slowing North American Trade Deal

Replacing the North American Free Trade Agreement (NAFTA) has proven difficult for the Trump administration. Trade negotiations have progressed slowly, with Mexico, Canada, and the United States rarely seeing eye-to-eye on most issues. Some of the biggest problems have dealt with content requirements.

The latest hangup stems from a rule requiring 70 percent of the steel and aluminum found in North American vehicles to come from the same continent in order to ensure a duty-free existence. Mexico isn’t keen on the proposal — as it sources a large amount of metal from Brazil, Japan and Germany. Meanwhile, the United States is attempting to use the inclusion to appease the United Steelworkers union and keep labor-focused jobs in the country.

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U.S. Trade Head to Meet With UAW This Week Over New Trade Deal

U.S. Trade Representative Robert Lighthizer will be in Michigan this week to meet with union leaders from United Auto Workers in a bit to gain their approval for the Trump administration’s new North American free trade deal. Lighthizer is scheduled to meet with union officials in Dearborn on Tuesday to answer questions about the United States-Mexico-Canada Agreement (USMCA) while simultaneously drumming up support.

The USMCA deal suggests increasing existing requirements for North American content for vehicles, stipulating that 40 percent of a vehicle’s overall content be manufactured in areas paying at least $16 an hour, while also encouraging Mexico to tailor its labor rules to allow unions to wield legitimate collective bargaining powers.

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Trade War Watch: Canada Says It'll Take Its Time Reaching a Deal; Japan's Up for Talks

Canadian Prime Minister Justin Trudeau ignored mounting pressure from the United States to quickly agree to a new NAFTA deal on Wednesday. Trudeau indicated it was possible for the three nations to maintain a trilateral agreement, but noted his priorities would always align with what’s best for Canada. The nation now seems fine with ditching the agreement altogether.

Meanwhile, U.S. President Donald Trump announced that an agreement reached with Japanese Prime Minister Shinzo Abe allows the two countries to begin trade negotiations. The focus of these talks will likely be automotive in nature. Trump has remained oddly fixated with convincing Japan to sell more American-made models ever since taking office, and the Land of the Rising Sun doesn’t want itself saddled with import tariffs.

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Lighthizer: U.S. Won't Bother Waiting for Canada on New NAFTA Pact

U.S. Trade Representative Robert Lighthizer has said the United States will begin moving forward on its bilateral trade deal with Mexico at the risk of leaving Canada behind.

The nation was already given until the end of September to reach an agreement that would effectively maintain the existence North American Free Trade Agreement, but has not indicated satisfaction with the current terms. Unfortunately, the U.S. wants to ensure a deal is in place before the next Mexican president assumes office — giving it precious little time to spend on Canada after the last year’s worth of negotiations proved ineffective.

“If we push it beyond [October 1st], then we have a new negotiation with Lopez Obrador and we don’t know where that would go at all,” Lighthizer said. “It would be unfair to all the people that have been involved — certainly the U.S. workers, farmers and ranchers — to start a new negotiation with a new president of Mexico.”

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Trade War Watch: NAFTA Window Almost Closed, Canada Still Isn't Interested

The United States is getting extremely close to having to move forward on its NAFTA deal with Mexico without Canada, according to White House economic adviser Kevin Hassett.

“I’m a little surprised that the Canadians haven’t signed up yet,” Hassett said in an interview with Fox News. “I worry that politics in Canada is trumping common sense because there’s a very good deal that was designed by Mexico and the U.S. to appeal to Canada. And they’re not signing up and it’s got everybody over here a little bit puzzled.”

On Thursday, Canadian Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer met in Washington to discuss terms. However, no agreement was reached.

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Apparently, Everyone Negotiating NAFTA Is a Child

If you’re anything like this author, you’ve probably abandoned discussing the North American Free Trade Agreement in your personal life. That’s not because it stopped being important, but rather due to the fact that none of the three countries involved seem capable of making any sort of progress.

Presently, the United States and Mexico are focusing on rules associated with automotive production. However, after two days of non-stop negotiation, Mexican Economy Minister Ildefonso Guajardo said the two sides haven’t resolved their differences on the pending issues. Now Mexico says it won’t consider further negotiations until Canada agrees to a deal.

Here’s where things get remarkably shitty. Canada has already explained that it’s waiting for the U.S. and Mexico to strike a deal of their own. “If they can resolve their differences on [automotive trade], then I think we can move ahead and have the three of us talk about some of the other issues that affect all of us,” David MacNaughton, Canada’s ambassador to the U.S, said in an interview earlier this month.

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Three's Company, Too? Canada Returning to NAFTA Dance As U.S. and Mexico Approach Auto Deal

Canada says it could rejoin the NAFTA discussion, just as the United States and Mexico approach an agreement on automobiles. The two nations engaged in bilateral negotiations a little less than a month ago, seemingly making positive headway on a trade deal.

With President-elect Andrés Manuel López Obrador assuming office in December, it’s in the United States’ best interest to close a deal as soon as possible. It’s assumed the man, frequently referred to as “AMLO,” will make sweeping changes to the Mexican government. However, he also promises to join forces with several smaller parties from both the right and left to create a coalition aimed at rooting out corruption. The resulting level of uncertainty has many fearing difficult Mexican policy changes and trade negotiations in the future, effectively forcing a restart of NAFTA talks.

According to David MacNaughton, Canada’s ambassador to the U.S., the duo are close to finalizing a deal on automotive manufacturing. If so, the Northern nation is prepared to rejoin negotiations.

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Looks Like NAFTA Renegotiations Aren't Happening This Year

Governance is one hell of a slippery fish. While you want your elected officials to assist in helping the nation evolve with an ever-changing society, you don’t want a deluge of contradictory and ill-planned laws mucking things up. That’s why the best progress is carefully measured and negotiated. But something has to happen eventually or you begin wondering what we (and the various lobbies) are paying these dingbats the big bucks for.

For example, the North American Free Trade Agreement looks like it’s about to be abandoned until sometime after 2019. After negotiations missed numerous self-imposed deadlines, U.S. House Speaker Paul Ryan said Congress needed a notice of intent to sign by roughly May 17th if anything was to be finalized for 2018. That date came and went. Now, everyone appears to have thrown their hands up, with practically every country on the planet currently considering retaliatory tariffs against the United States.

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Trade War Watch: Trump Launches National Security Investigation On Auto Imports

President Donald Trump issued a tweet promising car manufacturers good tidings on Wednesday. “There will be big news coming soon for our great American Autoworkers,” he said. “After many decades of losing your jobs to other countries, you have waited long enough!”

Later that same day, the administration announced it had launched a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962. The Commerce Department explained that the probe would investigate whether imported vehicles and parts threaten the domestic industry’s wellbeing, taking into account its ability to develop new technologies and the impact of tariffs.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said.

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Bet You Forgot Today Was the NAFTA Deadline

If you forgot today was the deadline for finalizing North American Free Trade negotiations, don’t worry, so did practically everyone else. In fact, the whole affair is starting to feel like that old car that’s been sitting in your friend’s yard for far too long. He keeps telling you he’s going to fix it up and make it better than new. “This is the summer,” he says. But you know he’s just going to keep mowing around it while it continues to rust and collect mice, so you’ve tried to push it out of your mind.

Like the restoration, the entire concept of a deadline for the trade deal is rather arbitrary at this point. NAFTA’s initial target date for an agreement between the three countries was March 31st, roughly one year after negotiations began. The May 17th deadline was claimed by U.S. Speaker of the House Paul Ryan, who said Congress had to be notified under the Trade Promotion Authority statute.

“We need to receive the notice of intent to sign soon in order to pass it this year,” explained Ryan’s office. “This is not a statutory deadline, but a timeline and calendar deadline.”

Basically, Congress wants to influence the president and NAFTA negotiators to conclude talks swiftly and reach an agreement before midterm elections. But Mexican officials warned everyone not to get their hopes up. “The possibility of having the entire negotiation done by Thursday isn’t easy, we don’t think it will happen by Thursday,” said Mexican Economy Minister Ildefonso Guajardo earlier this week.

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Here's How Trade Negotiations Are Looking for the Month of May; Steel Tariffs Stalled Through June

May kicked off with a bundle of trade deals going into hibernation mode. After some legitimate — albeit quaint — progress, NAFTA decided to take a break this week. Currently, U.S. Trade Representative Robert Lighthizer is in China to circumvent that brewing trade war and is unable to commit himself to the North American Free Trade Agreement’s renegotiation.

That’s probably fine, because Mexico’s auto reps need time to cool off.

The United States’ most recent proposal for increasing NAFTA’s regional automotive content includes a four-year evolvement to meet a 75-percent regional value threshold. It also suggests new labor rules requiring “substantial work” to be set at wages of $16 an hour or more. The move is intended to help the U.S. and Canada bolster production and force Mexico to raise its own wages.

A significant portion of Mexican trade officials aren’t keen on either aspect, resulting in a mixed response overall.

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Team Trump Eases Demands on NAFTA's Regional Auto Content

The United States is softening the contentious automotive content requirement mandates pushed by the Trump administration as part of NAFTA renegotiation talks. While the demand is only one of many asks coming from the U.S., both Canada and Mexico said forcing 85 percent of a vehicle’s overall content to be sourced from the three countries (in order to side-step tariffs) was a nonstarter. Over the past year, the issue became a major sticking point in the trade talks — hindering progress and possibly dooming them to failure.

While Trump’s intent was to bolster domestic employment by incentivizing North American parts suppliers, automakers expressed concerns and noted it was often difficult to reach the current threshold of 62.5 percent.

The United States has now proposed applying the new content requirement only to major components (like a vehicle’s powertrain) while leaving fasteners (nuts, bolts, etc.) alone. As an automobile is made up of tens of thousands of individual parts, deciding what should and should not be counted will make a big difference. Still, some manufacturers are likely to have difficulty meeting the proposed content requirement on critical engine components.

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