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  • The deal includes tougher rules on labor and automotive content but leaves US$1.2 trillion in annual trade flows largely unchanged.

    The deal includes tougher rules on labor and automotive content but leaves US$1.2 trillion in annual trade flows largely unchanged. | Photo: AFP

Published 25 April 2020
Opinion

In a statement, Lighthizer said both Mexico and Canada had taken measures necessary to comply with their commitments under the U.S.-Mexico-Canada Agreemeent.

The new U.S.-Mexico-Canada trade agreement will take effect on July 1, a month later than initially proposed, U.S. Trade Representative Robert Lighthizer notified Friday Congress.

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Canada Ratifies New Trade Agreement with United States, Mexico

In a statement, Lighthizer said both Mexico and Canada had taken measures necessary to comply with their commitments under the U.S.-Mexico-Canada Agreement (USMCA), which replaces the 26-year-old North American Free Trade Agreement (NAFTA).

“The crisis and recovery from the COVID-19 pandemic demonstrate that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America,” Lighthizer commented adding that the “USMCA’s entry into force is a landmark achievement in that effort.”

The deal includes tougher rules on labor and automotive content but leaves US$1.2 trillion in annual trade flows largely unchanged. Some industries, including automakers, had been arguing for a delayed implementation because of the difficulties they are facing from the coronavirus pandemic.

While the USMCA modernizes trading rules and strengthens the enforcement of labor and environmental rights, its restrictions on auto trade and investment and on auto production will hurt the U.S. industry, according to an analysis published by the Peterson Institute for International Economics (PIIE).

Back in December, Mexico had asked the U.S. and Canada for a longer transition period for the auto industry to certify that it was meeting new, more stringent North American content rules.

The first version of the deal was only ratified by Mexico’s Senate back in June but neither the U.S nor Canada’s government ratified it. Democrats controlling the U.S. House of Representatives insisted on major changes to labor and environmental enforcement before bringing it to a vote.

Intense negotiations among Democrats, the Trump administration, and Mexico produced more stringent rules on labor rights aimed at reducing Mexico’s low-wage advantage, including verification of labor compliance at the factory level by independent labor experts.

In addition to the labor provisions, Democrats said they won the elimination of a 10-year data exclusivity period for biologic drugs from the agreement, which they feared would lead to higher U.S. drug prices.

Mexico included a last-minute revision for a tighter definition of steel and aluminum in USMCA’s automotive rules of origin to be “melted and poured” in North America. 

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