Canada OK of U.S.-Mexico-Canada Pact Could Lead to June Implementation Date

The Canadian Parliament approved the U.S.-Mexico-Canada Agreement (USMCA) last week, potentially kicking off a 90-day period before the pact takes effect.

Shortly after the Canadian Parliament’s March 13 ratification of the USMCA, however, associations representing automakers and automobile dealers urged the Trump administration to delay a reported June 1 implementation date.

The California Chamber of Commerce supports the USMCA based on an assessment that the agreement serves the employment, trading and environmental interests of California, the United States, Mexico and Canada, and is beneficial to the business community and the California and national economies.

The USMCA is a necessary modernization to the North American Free Trade Agreement (NAFTA) that recognizes the impacts of technology on the three countries’ economies.

The objectives of the USMCA are to eliminate barriers to trade, promote conditions of fair competition, increase investment opportunities, provide adequate protection of intellectual property rights, establish effective procedures for implementing and applying the agreements and resolving disputes, and to further trilateral, regional and multilateral cooperation.

Reactions

U.S. Trade Representative Robert Lighthizer said in a statement: “Now that the USMCA has been approved by all three countries, an historic new chapter for North American trade has begun…USMCA is the gold standard by which all future trade agreements will be judged and citizens of all three countries will benefit for years to come.”

Mexico President Andrés Manuel López Obrador said the Canadian Parliament’s action was good news because the USMCA guarantees his country can maintain economic and commercial relations with the most important, strongest market in the world at a time of economic and financial uncertainty.

Automotive Industry

In a joint release, the automotive industry groups said they were “gravely concerned” that there were so few weeks before a June 1 entry-into-force date for the USMCA, citing the need for more information on the new automotive rules of origin.

“We are in the midst of a global pandemic that is significantly disrupting our supply chains, and the industry is throwing all available resources into managing production through this crisis for our employees and for the broader U.S. economy. Even if it were reasonable to divert our attention to USMCA compliance, the United States, Canada and Mexico have yet to issue, even in draft form, the uniform automotive rules of origin regulations. Without them, many questions remain unanswered regarding how to interpret the new rules,” the groups stated.

They pointed out that additional time will be needed once the uniform regulations are available “to solicit the necessary information throughout the supply chain to certify that our cars and trucks qualify under USMCA.” The groups asked that the entry-into-force date of the uniform automotive rules of origin regulations occur “after an adequate adjustment period is provided.”

Trade Highlights

Approximately 14 million American jobs rely on trade with Canada and Mexico. In California alone, trade among the three countries supports 1,470,700 jobs.

Mexico and Canada are California’s top export partners. Mexico is the state’s No. 1 export market, with California exports to Mexico totaling $27.8 billion in 2019, a decrease from $30.7 billion in 2018. Mexico purchases 16% of all California exports.

California’s exports to Mexico are driven by computers and electronic products, which account for 21.1% of all California exports to Mexico. Other top categories include transportation equipment, nonelectrical machinery, and electrical equipment, appliances and components.

Canada is California’s second largest export market, purchasing 9.6% of all California exports. In 2019, California exported more than $16.6 billion to Canada.

Computers and electronic products remained California’s largest exports, accounting for 28.6% of all California exports to Canada.

Staff Contact: Susanne T. Stirling

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Susanne T. Stirling
Susanne T. Stirling, vice president, international affairs, has headed the CalChamber international activities for nearly four decades. She serves on the National Export Council (appointed by the U.S. Secretary of Commerce), the California International Relations Foundation, the U.S. Chamber of Commerce International Committee, and the Chile-California Council. Originally from Denmark, she studied at the University of Copenhagen and holds a B.A. in international relations from the University of the Pacific, where she now serves as a regent. She earned an M.A. from the School of International Relations at the University of Southern California.