News Article

USMCA Enforcement Scheduled for July 1

By Alejandro Enríquez | Mon, 04/27/2020 - 13:00

USMCA will become a reality on July, 1, after the US Trade Representative, Robert Lighthizer notified Congress on Friday that Mexican and Canadian governments have taken all measures necessary to go ahead with the deal. The Mexican Ministry of Economy celebrated the happening as "[the treaty] will bring legal certainty on benefit of the development of our peoples."

The new treaty will be enforced amid the COVID-19 and could provide a long-awaited economic relief for the Mexican government. "The upcoming enforcement of USMCA will boost economic recovery of our country and the North American region after the health emergency caused by COVID-19," said the Mexican Ministry of Economy in a statement. Mexico had a poor GDP performance in 2019, with an annual GDP negative growth of 0.4 percent in 4Q19 and a negative 1.9 percent growth in secondary activities, which include manufacturing.

There are a few issues to be solved before July 1, however. Canada, Mexico and the US still need to appoint the dispute settlement panelists established in the treaty. In addition, according to Politico US, "there are certain Mexican laws, including some related to customs and intellectual property, that have not yet been changed to comply with the deal." Intellectual property, digital trade, financial services and the agricultural market were at the core of the main improvements made to the 25-year-old NAFTA.

The upcoming enforcement of USMCA will boost economic recovery of our country and the North American region after the health emergency caused by COVID-19" 

- Mexican Ministry of Economy 

For automakers, USMCA’s enforcing amid the COVID-19 pandemic, which has kept operations stunned, represents a major issue. According to economic analyst Luis de la Calle, "there will be a special procedure for companies in the US to apply for a prorogue in the enforcement of the new rules of origin, which must be presented prior to July 1." Last week, the US federal administration affirmed automakers will be able to submit a draft that details the delayed actions to be taken to comply with the new rules. If this were the case, according to Politico, delays will only be available to a small fraction to automotive production.

The Mexican Ministry of Economy acknowledged the strategic importance of automotive industry for the Mexican economy. "The automotive sector is a pillar for formal jobs in North America. In Mexico, almost a million people are occupied in the sector. In addition, automotive industry is particularly important given the dimension, geographic reach and extension of its supply chains among different suppliers in North America," said the Ministry in a statement. However, this do not imply that the Mexican government has labeled automotive activities as essential. The statement acknowledges a common North American plan to start reopening the sector "taking into account the diversity and complexity" of the sector.

USMCA had the original mission to strengthen regional suppliers while increasing production. "The crisis and recovery from the COVID-19 pandemic demonstrates that now, more than ever, the US should strive to increase manufacturing capacity and investment in North America," said USTR, Robert Lighthizer in a press release. According to de la Calle, for Mexico to become a winner of FDI coming into the region, the country needs to show itself as a trustworthy partner.

The data used in this article was sourced from:  
Mexican Ministry of Economy, US Trade Representative, INEGI, Politico US, Heraldo de Mexico
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst