ALBAWABA — Canada and Mexico on Wednesday won a free trade dispute with the United States over its interpretation of how to calculate parts used in the production of new automobiles by the three nations.
The dispute centered on how to calculate the content requirements of a vehicle under the Canada, United States, Mexico Agreement (CUMSA in Canada, USMCA in the US) that replaced the North American Free Trade Agreement.
In the dispute over how to determine the origin a vehicle that comes collectively from the three countries under the USMCA, Mexico and Canada argued that more regionally produced parts should count toward duty-free shipping than the U.S. wanted to allow for motor vehicles, the top manufactured product traded between them, worth about $162 billion annually.
Under the agreement, 75 percent of the parts used in the manufacture of vehicles had to originate in North America or face a tariff. The U.S. wanted a different way to determine the 75 percent needed for tariff-free trade, leading to fears that the American interpretation would lead to more parts being made in the U.S. at the expense of manufacturing jobs in Canada and Mexico.
The complaint was ruled upon by a five-member dispute-resolution panel set up under the 2020 U.S.-Canada-Mexico Agreement, finding in favor of Canada and Mexico.
The decision was made on Dec. 14 but only released Wednesday due to the U.S.-Canada-Mexico Summit in Mexico City that ended Tuesday.
"Today's decision is a good decision for the industry," Canada's Minister of International Trade, Export Promotion, Small Business and Economic Development Mary Ng told reporters in Mexico City. "It's what we negotiated… Clarity in the rules — it's what today's decision provides."
U.S. Trade Representative Katherine Tai’s office called the ruling “disappointing,” arguing it “could result in less North American content in automobiles, less investment across the region and fewer American jobs”.
The U.S. is considering its next move.
