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U.S.-Mexico-Canada agreement (USMCA)

U.S., Mexico Seek to Close USMCA Loophole


Mexico is working closely with U.S. Trade Representative Robert Lighthizer to close a loophole in the new North American trade deal, aimed at satisfying demands of U.S. Democratic lawmakers for tougher labor and environmental provisions, a senior Mexican official said.

This story by Reuters appeared in Automotive News Canada.

The U.S., Mexico and Canada signed the U.S.-Mexico-Canada Agreement (USMCA) last November, to replace the North American Free Trade Agreement that governs more than $1.2 trillion of mutual trade, but implementation is subject to ratification by lawmakers in all three countries.

Mexico’s deputy foreign minister for North America, Jesus Seade, said the proposal he was working on with Lighthizer was focused on closing a loophole in the trade deal’s dispute resolution mechanism.

Democrats in the U.S. Congress, largely in the Democratic-controlled House of Representatives, have threatened to stall on ratification until their concerns are met. The new trade deal to replace NAFTA had come at the behest of Republican U.S. President Donald Trump.

Henry Connelly, a spokesman for House Speaker Nancy Pelosi, did not comment on the substance of negotiations. He said labor and enforcement provisions of the USMCA are a key concern of House Democrats. “The speaker continues to work with her caucus and the USTR to strengthen these critical areas of the proposed agreement,” Connelly said.

Seade said as the deal now stands, the U.S. could start a formal trade dispute if Mexico was exporting a product made under labor conditions it considered unfair and contrary to the rules in the pact. However, he said, a loophole meant Mexico could theoretically block a dispute panel from being created.

“There is a gap in the dispute resolution system,” he told Reuters in an interview on Wednesday. “We are trying to find a way to plug that gap.”

When Congress returns in September, some Mexican officials worry that politics around the U.S. 2020 presidential race will make it harder for Congress to agree.

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