USMCA Insiders Say Review Worrisome and an Opportunity

But Verheul, who spoke to an audience last week convened by the Washington International Trade Association as one of the three leaders for The Coalition for North American Trade, expressed anxiety about the talks that will be part of the six-year review of USMCA. "I think we're going to have a very hard time between now and then," he said. "And I think we're going to go through some pretty rocky challenges getting there."

Verheul said, "We shouldn't be spending too much time on bilateral issues between us. Obviously, we'll have to resolve some of those, but those are not the game-changer issues."

U.S. Trade Representative Jamieson Greer has said that clearly Mexico and Canada have to resolve irritants, which he sees as evidence they're not living up to their USMCA commitments. With Canada, the most politically salient irritant is Canada's administration of its dairy tariff rate quotas.

Verheul said that if the USMCA doesn't continue with tariff-free trade in nearly all products, "and if we start to separate into three different economies, and we start to take apart some of the integrated market we have now, we're all going to be weaker."

While Canadian auto parts, fertilizer, oil and most food exports continue to be duty-free, lumber, cabinets, finished vehicles, steel, aluminum and many products made with those metals are tariffed somewhere between 10% and 50%, depending on the product.

Former House Ways and Means Committee Chairman Kevin Brady of Texas, the U.S. co-chair of the coalition, told the audience that zero tariffs and near-zero trade barriers in North America is the "secret sauce" of the agreement. "Our challenge is really to make the case -- Why does North American trade matter for America?"

Kenneth Smith Ramos, who was Mexico's chief negotiator when NAFTA was replaced by USMCA, said it's encouraging that out of more than 1,500 responses to the USTR on how the USMCA review should be conducted, more than 80%, in his estimate, argue that the USMCA is working, it should be extended, and economic integration should be strengthened.

He said that Mexicans have been wondering for 10 months what will happen to the USMCA, and whether the review will provide clarity about what will happen in the trade relationship.

"We still have a lot of questions. It is not clear whether we're going to have a review, a renegotiation, a partial renegotiation," he said, but the public consultations are heartening.

Smith Ramos said the U.S. is questioning free trade, and it's the coalition's job to build critical mass for USMCA.

He said that when Mexico exports goods, at least 35% of the good is U.S. value-add. "So this notion of trade as a zero-sum game where you lose if you import, or you lose if you have your companies invest either in Mexico and Canada is just false, and the evidence is out there."

Verheul noted that trade among the U.S., Canada and Mexico has increased more than 40% in the last five-and-a-half years.

But the tariffs on Canadian metals, autos and other products, as well as the tariffs on Mexican products are "a backward step," he said. That is costing U.S. importers and the industries in Canada.

Smith Ramos said that "despite the political turbulence over the last nine months," and the tariffs on formerly duty-free goods from Mexico and Canada, "investors are still betting on North America."

He said that producing products across the three countries allows manufacturers to sell at competitive prices, at a high level of quality.

He said that while Mexico is worried about what could happen next year at the review, having the ability to "periodically review how the agreement is operating, how new technologies, new concepts should be introduced" is a "very positive development."

He suggested the competitiveness chapter of the USMCA should be used as a launching pad for strengthening capabilities across the three countries in semiconductor production, high-tech medical equipment, lithium batteries, "and a whole set of issues that will make or break our competitiveness for the rest of the century. So, we should really look at the USMCA as a vehicle to enhance our competitiveness, not just worry about whether we're going to be able to preserve what we have up to now, but rather build on it, not just in this review, but in subsequent reviews."

Moderator Nasim Fussell, vice president of trade at the Business Roundtable and former chief trade counsel for Republicans on the Senate Finance Committee, asked Brady about the fact that the USMCA review process as written in the pact doesn't give Congress a vote, just consultation.

She asked how Congress is looking at this now, and what advice he gives to former colleagues still in the House.

"Just because Congress isn't voting doesn't mean they're not persuading," he replied. "This is a president who will talk to a dozen members of Congress a day, maybe more." Brady said that those lobbying to allow free trade with Mexico isn't to get a vote for USMCA in Congress, but rather, to convince Republican lawmakers to talk to the president about the value in USMCA. "Because he is influenced, you know, by those conversations in a major way," Brady said.