WASHINGTON – One year after it took effect in the midst of a record economic downturn, the United States-Mexico-Canada Agreement (USMCA) has yet to end the trading friction between the North American allies.
The three countries said the new treaty will benefit their economies and workers, but as the anniversary nears on Thursday, the neighbours have already entered into a range of disputes – many of which have seen the US objecting to Mexican or Canadian practices.
“Most of the focus on USMCA over the next several years is going to be on the disputes,” said Edward Alden, an expert in the Foreign Relations Council.
USMCA replaces the North American Free Trade Agreement (Nafta), which had been in force since 1994, and which Alden said envisions the continent’s three economies at one point becoming a single market, like the European Union.
That vision appears to be dead, at least for now.
“USMCA is very much the rules for three separate North American economies to cooperate where they can, and rules for fighting where they can’t cooperate,” said Alden.
While the disputes between the countries have made headlines, Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, credited the deal with “removing the cloud of uncertainty” over continental commerce.
“That creates a better atmosphere for trade and investment than we’ve had in some time."
Former US president Donald Trump, known for his bellicose rhetoric even towards American allies, negotiated USMCA, but his successor Joe Biden could change policies.
However, there are also signs that even under a new government, the squabbling will continue.
Ready to fight
Canada is perhaps Washington’s closest ally, but when it comes to trade, the neighbours have several differences.
The US has long-running disputes over the Canadian dairy and softwood lumber industries, and has also taken issue with Ottawa’s solar panel exports and the taxation of American tech firms.
US Trade Representative Katherine Tai has said she will defend the country’s interests, starting with dairy farmers.
Her office has set up a dispute settlement panel under USMCA to examine the issue of milk quotas imposed by Canada, much to its dismay.
Francois Dumontier, a spokesman for a group representing Quebec milk producers, said USMCA provides “no advantage”.
He also called some provisions an “attack on Canadian sovereignty” because they restrict Canadian exports while allowing more imports from the US.
After the pandemic
On the other side of the border, David Salmonsen, senior director of congressional relations at the American Farm Bureau Federation, pointed to a long list of trade disputes, but said he is overall optimistic.
“I think we’ll get a better picture once everybody’s economies are recovering from the pandemic.
“We supported the agreement, and we think it’ll work to keep agricultural trade moving and growing between all three nations.”
Ottawa, however, has called for its own dispute settlement panel over Washington’s 18% tariffs on solar panels made in Canada.
Despite the skirmishes, Valeria Moy, general director of the Mexican Institute for Competitiveness, said over the past year, there has been “no radical change compared to Nafta”.
But, she expects USMCA could have an agreement on labour legislation in Mexico in the future.
Washington has already invoked USMCA twice to ask Mexico City to investigate violations of union rights in the automotive sector, notably at a General Motors plant.
“Will this have a beneficial effect on Mexican workers? It seems to me that it will,” said Moy.
“It will force Mexican companies to make changes.”
But, she warned that the US may end up using the labour issue “as a pretext to apply protectionist measures”. – AFP, June 27, 2021
