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USMCA Is Uncharted Territory for Signature Nations


Photo: AndNowUKnow

By RICARDO CASTILLO    

With Canada joining the newly drafted United States-Mexico-Canada Agreement (USMCA), the stage is set for the leaders of the three nations to sign the accord, once their respective senates have revised it. It is generally thought that the signing ceremony, if there is one, will be circa Nov. 29 or 30, 2018.

On Wednesday. Oct. 3, U.S. President Donald Trump and Mexican President-elect Andrés Manuel López Obrador (AMLO) reported holding a “great” half-hour phone chat, with both of them talking wonders about the other.

The conversation included reactions to the USMCA deal, paving the road for a relation that will include pressuring Central American nations to halt migration to the United States, as well as a decision for  U.S. Vice President Mike Pence — and not Donald Trump — to  will AMLO’s official swearing in ceremony on Dec. 1.

Nevertheless, on the twitter accounts @realDonaldTrump and @lopezobrador, the leaders wrote: “An important bond is being developed between both President Trump and President-elect López Obrador.”

Beyond the noisy presidential chat, in Mexico the talk of the day is the USMCA itself, with an abundant assortment of reactions regarding the content of the humongous agreement.

The first is the change of name. When President Trump said he wanted to get rid of the North American Free Trade Agreement (NAFTA), “the worst deal ever negotiated by the United States,” perhaps he meant the NAFTA name and not the whole trade enchilada. The meaningful part of the new name, however, is that the words “North American free trade” have been dropped at least for the next 16 years which is the lifespan of USMCA.

But let’s get into the nittygritty of some of the issues grabbing the attention of Mexican entrepreneurs. All are preliminary reactions to the anxiety being provoked by the still-not-well-known agreement.

First of all is a clause signed by the three nations to notify each other of any other trade deal they may be carrying out. In Mexico, all those having an opinion claim that it sends a very clear and direct message from Trump to Canada and Mexico about not doing formal trade agreements with China or any other nation that’s not included in a market economy.

The clause also is being interpreted as sidelining China as “an alternative market” – whatever that may mean for the future, since last August Chinese Ambassador to Mexico Qiu Xiaoqi met with AMLO and future Foreign Relations Secretary Marcelo Ebrard to announce China’s plans “to balance trade with Mexico” with a great interest from the Chinese government to invest in infrastructure.

The second-noisiest reaction to the USMCA (can you pronounce USMCA, please? – I still can’t) is that while coming to the trilateral agreement Trump did not drop the countervailing duties slapped on Mexico and Canada on steel and aluminum. The Mexican Steel Industry Chamber on Wednesday, Oct. 3,  was very clear in saying that “this is not an agreement” until the Trump administration drops those tariffs.

Another immediate complaint about the agreement came from Mexico’s generic drugs manufacturers, who are warning that now the waiting period for patents to expire will take 10 years longer than it used to be under NAFTA.

In the much-discussed Rules of Origin for auto and auto parts manufacturing, the rules of the agreement are so “rigid and complex” for manufacturers that instead they might push to opt for the establishment of the World Trade Organization (WTO) norms. Mexico and Canada will be able to export 2.6 million vehicles a year to the United States duty-free.

The United States, however, will increase its input in Mexican-made vehicles from 62.5 to 75 percent over the next five years. To avoid tariffs, 40 percent of the total inputs into new vehicles must be manufactured in areas that pay $16 an hour or more. Definitely, Mexico is not included in this part of the deal, as the biggest attraction of NAFTA was the existence of low wages in Mexico.

This may signify a steep drop in the auto parts manufacturing industry in Mexico, but even then, business leader Juan Pablo Castañón of the Mexican Business Coordination Council (CCE) says that, under the new deal, Mexico will increase exports to the United States and Canada by 50 percent. “It will guarantee growth,” he says.

Another issue of heated discussions was steeply defended by Canada and it will stay. That is the so-called “Chapter 19” that deals with the mechanisms to solve conflicts of international trade interests. It will stay pretty much as stipulated under NAFTA and not affect the anti-dumping and anti-subsidy laws of the United States.

In order to keep Chapter 19, Canada had to pay a big price of its own that affects its highly protected and subsidized dairy industry. Obviously, Canadian dairy producers are upset over this cost to them, as it opens the Canadian market to U.S. competition.

These are but a few of the salient points now publicly under discussion. What is a fact is that, nowadays, the leaders of the three nations consider the USCMA – in Trump’s words – “the most important agreement in the history of our nations” and both President Enrique Peña Nieto (with full approval from incoming President-elect AMLO) and Canada Prime Minister Justin Trudeau are satisfied, both with meeting a deadline and putting it into effect as soon as spring 2019.

The fact was that the 24-year old NAFTA did need to be revamped and even renegotiated with the speed of modern change, and all three nations have made concessions to come up with a deal that is “a win-win-win” agreement, as NAFTA indeed was.

Hang in there and hope for the best!

 

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Categories: Mexican politics, Mexico, Mexico-U.S. relations, Opinion, PoliticsTags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

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