New North American trade deal launches amid disputes
WASHINGTON/MEXICO CITY/OTTAWA (Reuters) — A modernized U.S.-Mexico-Canada trade pact took effect on Wednesday, ensuring continuity for manufacturers and agriculture, but the threat of disputes is exposing cracks in what was meant to be a stronger North American fortress of competitiveness.
As the deal kicks in, the Trump administration is threatening Canada with new aluminum tariffs, and a prominent Mexican labor activist has been jailed, underscoring concerns about crucial labor reforms in the replacement for the 26-year-old North American Free Trade Agreement.
The U.S.-Mexico-Canada Agreement includes tighter North American content rules for autos, new protections for intellectual property, prohibitions against currency manipulation and new rules on digital commerce that did not exist when NAFTA launched in 1994.
Trump had lambasted NAFTA as the “worst trade deal ever made” and repeatedly threatened to end it.
USMCA launches as the coronavirus has all three countries mired in a deep recession, cutting their April goods trade flows — normally about $1.2 trillion annually — to the lowest monthly level in a decade.
“The champagne isn’t quite as fizzy as we might have expected — even under the best of circumstances — and there’s trouble coming from all sides,” said Mary Lovely,
a Syracuse University economics professor and senior fellow at the Peterson Institute for International Economics in Washington. “This could be a trade agreement that quickly ends up in dispute and higher trade barriers.”
Issues dogging USMCA include hundreds of legal challenges to Mexico’s new labor law championed by President Andres Manuel Lopez Obrador to ensure that workers can freely organize and unions are granted full collective bargaining rights.
A ruling against it would harm Mexico’s ability to deliver on provisions aimed at ending labor contracts agreed without worker consent that are stacked in favor of companies and have kept wages chronically low in Mexico.
Democrats in the U.S. Congress had insisted on the stronger labor provisions last year before granting approval, prompting a substantial renegotiation of termss first agreed in October 2018.
The arrest of Mexican labor lawyer Susana Prieto in early June has fueled U.S. unions’ arguments that Mexican workers’ rights are not being sufficiently protected.
“I remain very concerned that Mexico is falling short of its commitments to implement the legislative reforms that are the foundation in Mexico for effectively protecting labor rights,” U.S. Representative Richard Neal, chairman of the House Ways and Means Committee, said on Tuesday.