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News Article

Despite Covid-19, USMCA Will Be Enforced in July

By Gabriela Mastache | Mon, 04/27/2020 - 12:39

Despite the current COVID-19 emergency, USMCA will come into effect on July 1. The news come after Robert Lighthizer, the US Trade Representative, announced on Friday that the US has already complied with all the internal procedures needed to implement the agreement.

According to the agreement, its enforcement must come three months after the last country notifies that is ready to implement the new conditions of the agreement. Both Canada and Mexico made the corresponding notifications on April 2 and 3, respectively.

USMCA’s enforcement represents a new story in the trade relationship of the region. The Office of the US Trade Representative (USTR) described the moment as the “beginning of a new historic chapter” and showcased the importance of strong commercial agreements in light of the current pandemic. “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. USMCA’s enforcement is a landmark achievement in that effort.”

According to Lighthizer, USMCA also offers revised and modernized clauses for different economic sectors such as “rules of origin, agricultural markets, intellectual property, digital trade, financial services, labor and numerous other sectors.”

Though the three countries have announced that they are ready to comply with the new conditions set by USMCA, several sectors in Mexico are still lagging and will have a hard time fulfilling the new conditions set by the agreement, specially the automotive industry. Different companies from the automotive industry have communicated to the government that there have been no advances in the “uniformity of regulations” in Mexico.    

Moreover, the current COVID-19 pandemic will impact the country’s productive chains, which without a doubt will have an effect on companies’ abilities to successfully insert themselves in the new USMCA. In this juncture, the Interamerican Development Bank (IDB) and the Mexican Council of Businesses (CMN) have set up a joint strategy to guarantee chains of value in the country, which are bound to be very important to boost the country’s economic recovery. IDB and the CMN have set up a MX$12 billion (US$480 million) fund to provide credits and loans to almost 30,000 MSMEs that are part of the productive chains of large companies (mostly companies that are part of the CMN).

Tomás Bermudez, Representative of the IBD, says that the work done by the IDB and the CMN is not a substitute for a governmental funded countercyclical project, but a complement to any other initiative taken by the administration.

The data used in this article was sourced from:  
El Financiero, USTR
Gabriela Mastache Gabriela Mastache Senior Journalist and Industry Analyst