American industries are embarking on an unprecedented campaign to save their most vital trade agreement, but whispers coming out of Washington indicate the hard work put in by American industries may be for nothing. With the USMCA set to undergo its mandatory six-year review, heads of American industries are learning that the very lifeblood of North America’s economy hangs by a thread thinner than previously imagined.
Industry coalitions call for immediate USMCA renewal action
Trade organizations for products ranging from automobile components to consumer products have begun coordinated testimony at recent USTR hearings. Representatives from a variety of industries urged the Trump administration to reaffirm the United States-Mexico-Canada Agreement at public review hearings in December. While disagreeing on whether changes are required to be significant or specific, all believed that continuation is essential.
“Canada and Mexico are massive markets for American consumer packaged goods, and the guarantee of continued duty-free market access in USMCA-compliant products is essential to their continued success.” – Tom Madrecki, Consumer Brands Association
The Consumer Brands Association pointed out the essential role of duty-free trade for American businesses. The testimony included several points concerning the need for more harmonized rules of origin, especially for processed goods such as cocoa and coffee. The representative’s organization includes companies that have structured entire supply chains based on the USMCA rules. Such companies invested billions in borderless infrastructure.
Automotive industry urges streamlined trade procedures
The car industry has put forward comprehensive proposals for change during the hearings, with a focus on the upgrade of old legislation in the electric vehicle era. Flavio Volpe, the head of the Automotive Parts Manufacturers’ Association, called for changes to rules of origin paperwork and definitions related to the electric vehicle era for key components. In addition, his group also asked for the recognition of tooling as regional value content and faster procedures for dispute resolution.
The retail and textile industries proposed an extensive agenda for reform
The retailers are also seeking a greater recognition of parts that come from CAFTA-DR countries. Sung Chang, of the Retail Industry Leaders Association, believes that a strategy of this nature could help quicken the pace of near-shoring initiatives in the Americas. Another concern that the retail community has raised is the transparency and uniformity of customs enforcement in Mexico.
Key textile industry priorities:
- Exemption from duties on CAFTA-DR goods
- Reformed yarn-forward rules for unavailable inputs
- Strengthened enforcement tools for fraud prevention
- Greater data sharing obligations among countries
The textile industry had its own set of specific demands through Katherine White of the National Council of Textile Organizations. Her testimony required that duty exemptions be extended to goods from CAFTA-DR countries, in light of the crucial co-production arrangements between the US and Central American countries. The textile industry also has specific demands regarding yarn-forwarding rules, to permit duty-free importation if the material is not available in the USMCA group, especially specialized fibers such as acrylic.
Trump’s administration indicates a possible withdrawal from the agreement
Despite having overwhelming support in the industry, U.S. Trade Representative Jamieson Greer hinted that President Trump might withdraw from the USMCA agreement next year. This news introduces a dramatic element in the conflict between the anticipation of the business community and what the government might do. The threat of withdrawal implies a reversal of assumptions about the future of the agreement.
The business organizations are continuing to make their case, despite these threatening signals emanating from Washington, focusing on the economic implications of withdrawal. Their testimony indicates a strong integration between U.S. firms and their Canadian and Mexican counterparts, implying that withdrawal could cause immediate economic instability in several sectors, destroying thousands of jobs in the process.
