[CTC] NAFTA implementation timeline complicated by coronavirus

[Arthur Stamoulis]

Politico Pro
 
USMCA implementation timeline complicated by coronavirus
By Sabrina Rodriguez 
03/30/2020

The Trump administration is not on track for the new North American trade pact to fully go into effect as planned on June 1, making it likely that automakers will have extra time to prepare to comply with the deal’s new rules, multiple people familiar with the talks told POLITICO. 

The U.S., Mexico and Canada are two days away from missing a deadline in order to meet their June 1 target date for the deal to enter into force.
The three countries would have to exchange letters by Wednesday that certify they have each met all the necessary obligations — including developing uniform regulations that govern how cars qualify for reduced tariffs — outlined in the deal. Once the letters are exchanged, USMCA rules state that the deal would go into effect “on the first day of the third month following the last notification.”

But industry officials and people familiar with the talks say they have received no indication that the North American trading partners are ready, particularly given all three countries’ focus in recent weeks on combating the coronavirus.
A delay in implementation would be good news for automakers, who are currently either dealing with regional shutdowns or revamping their production lines to help meet U.S. medical equipment needs. Auto industry groups in the U.S., Mexico and Canada have already been vocal in urging the three countries to hold off on enforcing the deal.
“It would be a mistake for them to rush it,” one source familiar with the talks said. “I’d rather see companies like [General Motors] making ventilators than having to worry about implementing new auto rules of origin.” 
“If they don’t exchange letters by Tuesday midnight, this slips to July 1 at the earliest,” the source said, adding that Trump officials were expected to meet with automakers either Friday or Monday to discuss the situation.
Still, officials in the three countries have held conference calls in an effort to make their June 1 target. U.S. Trade Representative Robert Lighthizer, Canadian Deputy Prime Minister Chrystia Freeland and Mexican Economy Minister Graciela Márquez Colín spoke on Wednesday about their efforts to meet the deal’s requirements.
“We’re advancing very quickly to have prepared all the procedures,” Márquez Colín said in a news conference on Wednesday ahead of a conference call with her U.S. and Canadian counterparts.
Crafting uniform regulations for automakers to follow in North America has long been expected to be the most challenging issue for USMCA implementation, given that the new auto rules are one of the biggest changes President Donald Trump secured in the new deal.
“No one has even seen a draft of the uniform regulations, and to think that’s going to happen in such a short time frame … it’s just probably not doable,” an industry source said.
One of the biggest changes from the original NAFTA is stricter rules on how North American cars and car parts qualify for reduced tariffs. Those new rules, which aim to increase car production within the region, are much more specific with provisions such as one that requires automakers to purchase 70 percent of the steel and aluminum they use from North American sources.
Automakers have long said complying with the rules will require time-consuming and costly changes. That’s why they’ve been pushing back on the administration’s tight time frame in the face of the coronavirus outbreak.
Earlier this month, the U.S. automotive industry expressed concern about the Trump administration’s move to set an entry into force date so soon, given that the industry is trying to navigate the disruption to supply chains caused by the pandemic.
The industry, represented by various groups, urged the Trump administration to offer an adjustment period for automakers to adapt to the uniform regulations for automotive rules of origin.
“While the industry is doing as much work in advance as they can, once the uniform regulations are available, it will still take an additional period of time to solicit the necessary information throughout the supply-chain to certify that our cars and trucks qualify under USMCA,” the American Automotive Policy Council, American International Automobile Dealers Association, Here for America, National Automobile Dealers Association and Motor & Equipment Manufacturers Association said in a joint statement.
Last week, Concamin, Mexico’s Confederation of Industrial Chambers, and Mexican auto industry groups asked that the new auto rules be delayed until January 2021 given the complexity of the new requirements.
“If we add to this scenario the problems created by the Covid-19 in terms of parts and components supply and reduction of operations … it’ll be impossible for companies in our country to comply with the new rules starting on June 1,” Concamin said in a statement. 
The three countries must also draw up their lists of panelists to have ready to settle any potential dispute before the deal can go into effect.
“Would it be possible in this time frame to do a thorough implementation for USMCA the way it’s been historically done for other trade deals? I don’t think so,” one of the people said.
 
Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826




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