Photo: © Dilok Klaisataporn | Dreamstime.com
Canada was looking in from the outside as formal negotiations on the future of the North American USMCA free trade agreement between Mexico and the US kicked off in Mexico City last Thursday.
After two rounds of preparatory talks earlier this year, officials of the two sides started the first of three rounds of formal negotiations to iron out their differences and clear the way for the tripartite agreement on the renewal of the free-trade framework for the next 16 years. Further sessions are scheduled for mid-June and July.
The US and Canada are yet to set dates for formal talks on USMCA.
The first round of Mexico-US talks was focused on the themes of economic security and rules of origin for key industrial goods, touching on the automotive, medical devices, steel and aluminium sectors.
The second session, scheduled for 16-17 June in Washington, will deal primarily with agriculture and a “level playing field”, while the third is due on 20 July in the Mexican capital.
While no details of the negotiations were released, both sides declared they progressed ‘in an orderly manner’ and stressed the “constructive atmosphere and frank dialogue” of the session. It remains to be seen in how far this has shrunk the gap in key positions between them, notably US tariffs on steel and aluminium and levies on cars.
Mexico’s economy minister, Marcelo Ebrard, who led his side’s delegation, has called the 50% tariffs on the former “unsustainable” as well as “unjustified”. On the automotive sector he emphasised the need for a framework covering all three USMCA partners that ensures systemic competitive strength vis-à-vis international rivals.
That the US imposes lower tariffs (15%) on cars from the EU, Japan and South Korea than on vehicles from Mexico is one major irritant in this arena.
Industry organisations from all three USMCA countries have stressed the importance of collective North American competitiveness and urged governments to extend the free-trade arrangement that generates nearly $1.6bn in annual trade between them. In a joint letter to US trade representative Jamieson Greer, 69 US business associations called USMCA “critical to the competitiveness of the US”.
This does not mean that industry bodies favour concessions to secure fast passage of the USMCA extension. Mexico’s private sector, including the supply chain industry, has expressed support for a firm stance on concessions to secure a treaty renewal. It has urged the government to prioritise long-term competitiveness over certainty derived from an early completion of the negotiations.
Eva María Muñoz, president of AMACARGA, Mexico’s national cargo agents’ association, commented that all firms in the logistics sector could adjust their plans and projections dealing with uncertainty.
The prospect of a treaty renewal by 1 July has been officially buried. Both Messrs Ebrard and Greer have commented that it would take longer to reach common ground to renew USMCA. For that matter, the third round of bilateral talks between Washington and Mexico City is now scheduled for 20 July, and it will be some time before the US and Canada work through their differences to set the stage for tripartite talks.
Canada’s minister responsible for US trade, Dominic LeBlanc, is planning to travel to Washington for trade talks, but a date has not been confirmed. Over the past seven months Mr LeBlanc has held just one day of talks with Mr Greer.
The latter has stated that Washington had “significant differences” with Ottawa that would be difficult to resolve, citing issues that are “well beyond trade irritants”. He bristled at Canadian counter tariffs (the only nation other than China to do so) and a ban on US liquor in licensed alcohol retail outlets, and Ottawa’s refusal to make concessions to US demands in order to start negotiations.
Comments by Canadian prime minister Mark Carney on a changing global trade landscape, an agreement allowing 49,000 electric vehicles to be imported from China into Canada in a 12-month period at a tariff rate of around 6%, and negotiations with Saab to buy a fleet of surveillance aircraft to replace the Canadian air force’s current US-made models have not endeared the northern USMCA member to the White House.
The only concession that Washington has offered to Canadian firms was a tariff reduction for steel makers if they commit to set up production in the US.
In March, US cross-border truck freight was up 5%, driven by 13% growth in traffic with Mexico, whereas Canadian volume was down 7%.
For their part, Canadian officials have declared themselves ready to sit down and negotiate, waiting for their US counterparts to get ready.
Meanwhile, the US president has indicated he might walk away from USMCA and opt for bilateral treaties, a position that both Ottawa and Mexico City have firmly rejected, insisting that a regional free-trade structure is essential for global competition.
They are also opposed to tariffs, a position that clashes with Washington’s ambitions. Mr Greer insisted that the US would have tariffs, “even with somebody like Mexico, or other countries that are in our own hemisphere, we’re going to have tariffs as long as we have a giant trade deficit.”
US logistics firms appear unfazed by the USMCA rhetoric, at least as far as Mexico is concerned. Last month, UPS, Werner Enterprises, CPKC-CSX and CH Robinson announced upgrades or expansions of services into Mexico.