OTTAWA – Canada and Mexico have gained their problem to the U.S. interpretation of content material guidelines for autos below the brand new North American commerce pact, a dispute panel dominated on Wednesday, a call that favors components makers north and south of the U.S. border.
A yr in the past Canada and Mexico filed a grievance towards the United States over apply automotive-sector content material necessities below the United States-Mexico-Canada (USMCA) free commerce settlement, which got here into impact in 2020.
The U.S. interpretation of the foundations is “inconsistent” with the USMCA, the panel mentioned in its ruling.
“The decision is good for Canada and Mexico,” mentioned Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association.
Canada “is glad to see that the dispute settlement mechanisms in place are supporting our rights and obligations negotiated in USMCA,” Canadian Trade Minister Mary Ng mentioned in an announcement.
“This is excellent news,” mentioned Tatiana Clouthier, Mexico’s former economic system minister in a video on Twitter. “That helps the entire automotive industry in the North American region enormously.”
The choice is “disappointing,” mentioned Adam Hodge, a spokesperson for the United States Trade Representative’s workplace, including that the choice may lead to “fewer American jobs.”
Under the USMCA, the United States should now agree with Canada and Mexico on apply the panel choice, or face doable retaliatory tariffs.
“We are reviewing the report and considering next steps,” Hodge mentioned. The USTR will now “engage Mexico and Canada on a possible resolution to the dispute,” Hodge mentioned.
“In the coming days, Mexico will begin a process of dialogue and cooperation with its trading partners,” Mexico’s economic system ministry mentioned in an announcement after the ruling.
The choice was introduced amid a separate USMCA dispute centred on vitality that has pitted the United States and Canada towards Mexico. Ottawa and Washington argue Mexico’s vitality insurance policies are placing U.S. and Canadian companies at an obstacle, whereas Mexico has defended its insurance policies and mentioned it has damaged no legal guidelines.
Under USMCA, 75 per cent of a car’s parts should originate in North America to qualify for tax-free standing, however the United States disagreed with calculate that quantity.
Mexico and Canada mentioned if a “core part,” such because the engine or transmission, has 75 per cent regional content material, the USMCA permits that quantity to be rounded as much as 100 per cent when calculating the broader requirement for a whole automobile’s regional content material.
The United States mentioned “core part” content material shouldn’t be rounded up when figuring out the content material of the whole automobile.
Volpe mentioned the choice is also essential as a result of it demonstrates that disagreements may be settled below the foundations of the brand new commerce pact.
“It shows that the dispute-resolution vehicle within the USMCA works,” Volpe mentioned.