OTTAWA – Canada and Mexico have received their problem to the U.S. interpretation of content material guidelines for autos beneath 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 in opposition to the United States over the best way to apply automotive-sector content material necessities beneath the United States-Mexico-Canada (USMCA) free commerce settlement, which got here into impact in 2020.
The U.S. interpretation of the principles is “inconsistent” with the USMCA, the panel stated in its ruling.
“The decision is good for Canada and Mexico,” stated 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 stated in an announcement.
“This is excellent news,” stated 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 resolution is “disappointing,” stated Adam Hodge, a spokesperson for the United States Trade Representative’s workplace, including that the choice might lead to “fewer American jobs.”
Under the USMCA, the United States should now agree with Canada and Mexico on the best way to apply the panel resolution, or face doable retaliatory tariffs.
“We are reviewing the report and considering next steps,” Hodge stated. The USTR will now “engage Mexico and Canada on a possible resolution to the dispute,” Hodge stated.
“In the coming days, Mexico will begin a process of dialogue and cooperation with its trading partners,” Mexico’s economic system ministry stated in an announcement after the ruling.
The resolution was introduced amid a separate USMCA dispute centered on power that has pitted the United States and Canada in opposition to Mexico. Ottawa and Washington argue Mexico’s power insurance policies are placing U.S. and Canadian companies at an obstacle, whereas Mexico has defended its insurance policies and stated it has damaged no legal guidelines.
Under USMCA, 75 p.c of a automobile’s elements should originate in North America to qualify for tax-free standing, however the United States disagreed with the best way to calculate that quantity.
Mexico and Canada stated if a “core part,” such because the engine or transmission, has 75 p.c regional content material, the USMCA permits that quantity to be rounded as much as 100% when calculating the broader requirement for a complete automotive’s regional content material.
The United States stated “core part” content material shouldn’t be rounded up when figuring out the content material of all the automotive.
Volpe stated the choice is also vital as a result of it demonstrates that disagreements could be settled beneath the principles of the brand new commerce pact.
“It shows that the dispute-resolution vehicle within the USMCA works,” Volpe stated.