U.S. trade associations and members of Congress are pushing to delay the July 1 launch date of the new United States-Mexico-Canada Agreement (USMCA).
Business leaders argue the coronavirus pandemic has diverted resources needed to ensure a smooth transition from the previous North American Free Trade Agreement (NAFTA) to the USMCA.
John Murphy, senior vice president for international policy at the U.S. Chamber of Commerce, recently told Politico that “companies will need time to adapt to the new regulations” because of the disruption caused by the pandemic.
“Industry wants the administration to show flexibility in the months before and after entry into force so they can focus on making payroll and avoiding layoffs,” Murphy said.
Lindsay Meyer, co-chair of Venable LLP’s international trade group, said she has mixed feelings about delaying the start of USMCA.
“On the one hand, given the pandemic, there are challenges in the supply chain, which from a North American perspective are most pronounced in the order by Mexican President Manuel Obrador to halt manufacturing operations in Mexico,” Meyer told FreightWaves. “That has been a pinch for some U.S. manufacturers who rely on Mexican-made parts and components.”
Because of the coronavirus pandemic, the Mexican government suspended all non-essential activities – including the closure of hundreds of factories along the U.S.-Mexico border – on March 30.
Meyer added that “it is going to take some time for North America to get opened up in light of what we are learning about our new social distancing requirements, which I think are most challenging in manufacturing capacities.”
Other U.S. trade and advisory groups also recently urged President Trump to delay the start of USMCA.
The Commercial Customs Operations Advisory Committee (COAC), a private sector group created by Congress to advise Customs and Border Protection (CBP), sent a letter to the Trump administration recommending not to implement the USMCA for at least another six months
“Now is not the time to implement a trade agreement that contains so many important and meaningful changes that will impact certain industries in a significant financial manner,” concluded COAC during its quarterly meeting on April 15.
Members of the U.S. Senate Finance Committee also recently expressed concern that businesses across the nation do not have the information they need to adjust to the new rules in the USMCA.
“The COVID-19 pandemic has impacted governments, businesses, workers, and farmers globally, leaving little, if any, time and resources to prepare for a smooth transition to USMCA,” the committee members said in a statement. “Entry into force should only happen after all necessary regulations are in place and our industries have had an opportunity to understand and implement them effectively.”
A trade association in Canada said the USMCA could cost dairy farmers across that country more than $100 million in lost revenue if it goes into effect July 1.
“We’re talking adjustment to products, portfolios – the product mix of my members, so that means that it requires plants retooling, new products, you have to find a new market. Now we’re left to do all of this basically within 30 days,” Mathieu Frigon, president and CEO of the Dairy Processors Association of Canada, told the CBC on Tuesday.
U.S. Trade Representative Robert Lighthizer said that USMCA will begin as planned on July 1, according to an April 24 statement.
“The crisis and recovery from the COVID-19 pandemic demonstrates that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America,” Lighthizer said.
Meyer said the USMCA will most likely begin on July 1, but certain industries should be given a grace period.
“Then, the Trump administration can claim a win by that effective date (July 1), yet the industries that will be most significantly impacted – automotive and manufacturing – perhaps they’ll have a little bit of a grace period to see the implementation,” Meyer said.