Trump suggests USMCA will move forward as planned

April 14, 2020

Tyson Fisher

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Soon after 19 senators from the Finance Committee urged U.S. Trade Representative Robert Lighthizer to delay the launch of the United States-Mexico-Canada Agreement, President Donald Trump has indicated USMCA will proceed as originally planned. Meanwhile, more Congress members are urging the president for some kind of delay or flexibility.

During a press briefing on April 9, Trump was asked if he still plans to enforce USMCA on July 1 amid the disruptions caused by the COVID-19 pandemic. Trump signaled that he will continue with the trade agreement as signed.

“Obviously the deal is different from the standpoint that production will be lower, but we have a deal,” Trump said. “It’s a signed deal.”

Trump acknowledged that as a result of the pandemic, car production will be down. However, he also pointed out that USMCA will be helping farmers. The president said that farmers were hit hard by the pandemic as people have been “eating less” in terms of going out to restaurants.

“The farmers got hurt very badly by all of this,” Trump said. “People are eating less from the standpoint that there’s no restaurants that are open. No businesses are open, no hotels are open. They’ll start to come back, but we’re going to be helping out our farmers.”

The next day, 31 members of the U.S. House of Representatives sent a letter to Lighthizer requesting flexibility of USMCA’s rules of origin requirements for automotive manufacturers.

“This targeted extension is necessary to allow the auto industry an appropriate adjustment period and account for delays caused by the COVID-19 pandemic,” the letter states. “Alternatively, we ask that you seriously consider other accommodations or flexibilities that will allow the automotive sector to avoid being penalized by the new requirements upon the agreement’s entry into force.”

USMCA rules of origin require 75% of a car or light truck manufacturing must come from the United States, Mexico or Canada. Currently, NAFTA’s rules of origin is only 62.5%. Vehicles with a lower percentage are subject to tariffs. The stricter rules of origin are to incentivize more manufacturing in the U.S.

USMCA will require 60% of manufacturing of principal parts of heavy trucks take place in North America from the onset. Over a seven-year phase-in period, that rate will increase to 70%. Complementary parts for heavy trucks will need to be 54% North American from the day USMCA is in effect to 60% over seven years.

The request is led by Reps. Haley Stevens, D-Mich.; Jackie Walorski, R-Ind.; Terry Sewell, D-Ala.; and Jim Baird, R-Ind.

“(Motor & Equipment Manufacturers Association) applauds the leadership of Reps. Haley Stevens, Jackie Walorksi, Terri Sewell and Jim Baird in urging delay of the entry into force of the complex USMCA auto rule of origin provisions,” MEMA President Bill Long said in a statement. “They understand that without delay or a compromise on implementation, the motor vehicle parts sector will face another severe economic challenge at a time when a global pandemic has shut down our industry in North America. On behalf of the industry, we also thank the other 27 Members who joined in this effort.”

On March 30, 19 members of Senate Finance Committee urged Lighthizer to delay the launch date of USMCA. The senators want to postpone the implementation of the trade agreement that is to begin on July 1. Although senators are claiming the work is not complete, the letter cites the COVID-19 pandemic when justifying their request.

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