In mid-March, Canada ratified the USMCA trade deal, becoming the third and final country to ratify the deal that will replace the North American Free Trade Agreement. Now that the USMCA has been approved, a new chapter for North American trade is about to begin. While the official date has not been set, all three countries have begun taking important steps to be ready for implementation. There is still much work to be done on preparing the automotive rules of origin, and Mexico must also take steps to implement its major labor reforms. Additionally, some worry that the novel coronavirus outbreak could affect the implementation timeline, as industries work to navigate possible disruption to supply chains caused by the outbreak.

We were pleased to host a conversation by webcast with Mexico’s Undersecretary for Foreign Trade Luz María de la Mora as she discussed what Mexico anticipates as the steps ahead to implement USMCA.

Selected Quotes

Undersecretary Luz María de la Mora

 “What the agreement says is that USMCA will become effective, or will enter into effect, on the first day of the third month after the last notification was received. So, where we are right now in this ratification process is that the U.S. is still pending sending its notification to Canada and Mexico. Once that happens, then we can count the days.”

“When we’re talking about uniform regulations, we’re not talking about negotiating anything new; we’re not talking about changing the percentage of regional content of any of the rules of origin that were negotiated. The uniform regulations…and the reason why we are working on them is that they allow the final user of the rule of origin that will get the benefit of this preferential axis; they give them clarity—what is the methodology that can be used to estimate the percentage of regional value counted?”

“We are working on the most important uniform regulations which have to do with the automotive sector. We understand the concern of the industry in the sense that the industry needs to know with clarity how to estimate this new value content. And that’s what we have been working with the USTR for quite some time…It was something important for us to be able to work trilaterally. This is something that we cannot do individually; this is something that has to be done at the trilateral level.”

“For Mexico, having USMCA in place and understanding what is the value of an agreement like this one, or any international trade agreement, has to do with one key word, which is ‘certainty’—knowing…what are the rules that producers in North America, investors, exporters will have to face. And I think that certainty, at this time of huge uncertainty, will be key for Mexico to be able to be a part of the North American value chain.”

“We do acknowledge that we do not have a perfect fit in terms of coordination. We have not been able to get the same sectors operating in the same way, but I think this is also a result of an emergency that we have never dealt with in the past. And this is something we need to learn for the future—how do we coordinate, or how do we manage, to keep the health of the people as a priority and how can we manage to keep those regional value chains still in place?”

“Without a question, I think that we need to look at infrastructure, we need to look at trade facilitation, we need to look at transportation, we need to look at customs facilities, border crossings—all of the infrastructure aspects of trade: telecommunications, transportation, etc. However, we also acknowledge that probably the most important factor of competitiveness in the region will have to be our human talent, our talent pool.”

“With this reallocation of resources from the U.S. which is quite substantive…I am quite positive, and I am quite optimistic that with implementation of USMCA the environment will get some more attention and also will be able to get the resources needed for its protection.”

“We at the Ministry of Economy, we are very aware about the practical challenges that this implementation will bring to the table. We have absolute understanding of what the industry is facing, and we’re willing to have a transition period specifically for the auto sector as it has been requested. And as I have mentioned, we have put this issue on the table many times but unfortunately, this is not a Mexican decision; this is a trilateral decision.”

“We do acknowledge that what we’re seeing with this pandemic, it may be a reassessment of global value chains, and it may also be the case that value chains may become more regional, since we understand that supply and demand have to be closer.”

“This is an agreement that intends to bring North America, the three countries—Mexico, the U.S. and Canada—together, so that we can remain competitive vis-à-vis the rest of the world. So, for me, the challenge is how do I make sure that Mexico remains an essential part of that competitiveness equation.”