Daily Management Review

Canada Echoes Mexico’s Concerns And Asks For Consultation With US Over USMCA Content Rules


Canada Echoes Mexico’s Concerns And Asks For Consultation With US Over USMCA Content Rules
Canada has sought formal consultation with the United States, after Canada did so, for discussing the interpretation of content rules for automobiles as has been set out in the North American trade pact, the two countries, Mexico and Canada said on Friday.
A formal consultation to clear out the exact interpretation and application of tougher content rules for cars under the United States-Mexico-Canada Agreement (USMCA) was requested by Mexico on August 20 after it protested against the issue in May during a virtual meeting in which the country cited differences in the methods used for this clause by the United States.
More flexible interpretations are used by Canada and Mexico.
"We know how important the auto industry is to Canada's workers and the Canadian economy. Canada has advised the U.S. and Mexico that it intends to join the consultations as a third party," said Patricia Skinner, spokeswoman for Global Affairs Canada.
Canada is working closely with its other two partners of the deal and the auto industry over this issue as well as other relevant issues, Skinner said.
"We are pleased Canada has decided to join the request for consultations, which we requested on August 20, in relation to the interpretation the United States makes of the rules of origin in USMCA for the automotive sector," Mexico's economy minister, Tatiana Clouthier, said on Twitter.
According to the USMCA which replaced the former North American Free Trade Agreement under the presidency of the former United States president Donald Trump, a vehicle needs to have at least 75 per cent of its components sourced from North America content in order for it to be labelled as it being from North America.
Starting July 1, 2023, the same condition of proportion will also apply to essential parts of vehicles which have been raised from the limit of 69 per cent currently and was at 62.5 per cent under the previous trade agreement of NAFTA.
The argument in this issue by Mexico is that once the level of essential parts reaches 75 per cent, it should be considered to be 100 per cent and should be counted as such toward the overall value of the automobile.
The request for consultation is the first non-contentious stage of a dispute resolution mechanism provided for in the trade pact