New North American trade deal faces long, bumpy road

Sign of disputes already showing as US threatens new tariffs on Canadian aluminium and Mexican labour activist jailed

WASHINGTON: The revamped trade pact between the United States, Canada and Mexico taking effect yesterday was meant to create a kind of fortress North America, boosting the region’s competitiveness – but cracks are already starting to show in the foundation.

As the deal kicks in, the Trump administration is threatening Canada with new aluminum tariffs, and a prominent Mexican labour activist has been jailed, underscoring concerns about crucial labour reforms in the replacement for the 26-year-old North American Free Trade Agreement (Nafta). The risk of disputes among the three trading partners is growing, analysts say.

The US-Mexico-Canada Agreement (USMCA) 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, an agreement US President Donald Trump has lambasted as the “worst trade deal ever made.”

The coronavirus has all three countries mired in a deep recession, cutting their April goods trade flows – normally about US$1.2 trillion (RM5.1 trillion) annually – to the lowest monthly level in a decade.

Issues dogging USMCA include hundreds of legal challenges to Mexico’s new labour law championed by President Andres Manuel Lopez Obrador to ensure that workers can freely organise 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 favour of companies and have kept wages chronically low in Mexico.

Democrats in the US Congress had insisted on the stronger labour provisions last year before granting approval, prompting a substantial renegotiation of terms first agreed in October 2018. The arrest of Mexican labour lawyer Susana Prieto in early June has fueled US unions’ arguments that Mexican workers’ rights are not being sufficiently protected.

US Trade Representative Robert Lighthizer has said he will file dispute cases “early and often” to enforce USMCA provisions, citing Mexico’s failure to approve US biotech products.

That could lead to increased tariffs on offending goods, such as products from individual factories where labour violations are found.

Carlos Vejar, a former Mexican trade negotiator, said it was in the country’s interest to uphold pledges made to strengthen unions and end child labor.

“If Mexico isn’t mindful of this, there will be cases against Mexico, and Mexico will lose them,” Vejar said. – Reuters