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USMCA Trade Deal Update

Ratification of the USMCA Trade deal, the replacement for the North American Free Trade Agreement, is a priority for manufacturers across the country and especially those in New York State.  The Council of  Industry, along with hundreds of other business associations across the nation and the state, has signed letters of support for the USMCA encouraging Congress to approve the deal.

 

In New York, the Albany Times Union reports that “The Business Council of New York State is calling on the state’s congressional delegation to support the passage of the U.S.-Mexico-Canada trade deal, which would replace NAFTA upon ratification. About 800,000 jobs in New York are supported by trade with Mexico and Canada.”  https://www.timesunion.com/business/article/Business-Council-of-NYS-urges-Congress-to-pass-14117259.php

 

Earlier this month Manufacturers from all over the nation came to Washington, D.C to express the urgent need for United States-Mexico-Canada Agreement (USMCA) passage at a series of events with key legislative decision-makers. “The Trump administration continues to show its steadfast commitment to America’s manufacturing workers,” said  Emerson CEO David Farr. “Manufacturers in Missouri and across the nation are keeping our promise to grow, invest and hire. This historic agreement will help us sustain this momentum. Congress must act now and ratify this agreement.”

https://www.nam.org/manufacturers-show-up-to-push-for-swift-usmca-passage-5466/?stream=news-insights

 

Vote is planned for later this Fall.

CNBC is reporting that “the White House plans to send the USMCA to Congress after Sept. 1, setting up a vote by the end of the year.  The White House could submit the bill to Congress as soon as this week to start the approval process. House Democrats are meeting in working groups to hammer out issues with the existing agreement.”

https://www.cnbc.com/2019/07/10/trump-white-house-likely-to-send-usmca-trade-deal-to-congress-after-sept-1.html

 

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China, Mexico Signal Willingness to Step Up Trade Talks With U.S.

Beijing’s latest missive struck a newly measured tone, despite accusing Washington of scuttling negotiations, while Mexico sends a delegation to Washington to discuss immigration issues.

The Wall Street Journal Reports (Subscription Required) that China and Mexico both signaled a willingness to negotiate with Washington over escalating trade issues, while the Trump administration took to the airwaves to defend its use of tariffs to gain concessions from trading partners. “We’re willing to adopt a cooperative approach to find a solution,” Vice Commerce Secretary Wang Shouwen said in Beijing on Sunday.

Mexico, meanwhile, rushed a delegation to the U.S. to discuss immigration issues, following the Trump administration’s threat last week to impose tariffs on all Mexican goods entering the U.S. if the Mexican government fails to take aggressive measures to stem the flow of immigrants through Mexico and into the U.S. Tariffs on all Mexican imports would begin at 5% and rise by 5 percentage points each month before reaching 25% in October.

Meanwhile Bloomberg reports that Beijing has readied a plan to restrict exports of rare earths to the U.S. if needed, as both sides in the trade war dig in for a protracted dispute, according to people familiar with the matter.

Heavy rare earths include dysprosium, used in magnets commonplace in almost all cars and many consumer goods. The group also has yttrium, used in lighting and flat screens, as well as ytterbium, which has applications in cancer treatments and earthquake monitoring.

 

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Here is What is in the New NAFTA

US, Mexico, and Canada Reach agreement to Update NAFTA: Here’s what’s in the “New NAFTA”

After more than a year of intense negotiations, the United States, Canada, and Mexico reached an agreement to update the North American Free Trade Agreement, the 1994 pact that governs more than $1.2 trillion worth of trade among the three nations.  Congress and the legislatures in Canada and Mexico have yet to approve it, a process that is expected to take months, so most of the key provisions don’t start until 2020.

Here’s what’s in the “new NAFTA.”

New name. The new deal will be known as the United States-Mexico-Canada Agreement, or USMCA.

Big changes for cars. The goal of the new deal is to have more cars and truck parts made in North America. Starting in 2020, to qualify for zero tariffs, a car or truck must have 75 percent of its components manufactured in Canada, Mexico or the United States, a substantial boost from the current 62.5 percent requirement.

There’s also a new rule that a significant percentage of the work done on the car must be completed by workers earning at least $16 an hour, or about three times what the typical Mexican autoworker makes. Starting in 2020, cars and trucks should have at least 30 percent of the work on the vehicle done by workers earning $16 an hour. That gradually moves up to 40 percent for cars by 2023.

Dairy Canada opens up its milk market to U.S. farmers. Canada has a complex milk and dairy system. To ensure Canadian dairy farmers don’t go bankrupt, the Canadian government restricts how much dairy can be produced in the country and how much foreign dairy can enter to keep milk prices high. In the end, Canada is keeping most of its complex system in place, but it is giving a greater market share to U.S. dairy farmers. U.S. negotiators say they got a major victory by forcing Canada to eliminate the pricing scheme for what are known as Class 7 dairy products. That means U.S. dairy farmers can probably send a lot more milk protein concentrate, skim milk powder and infant formula to Canada (and those products are relatively easy to transport and store).

Dispute Resolution Chapter 19, allowing for a special dispute process, stays intact. Chapter 19 allows Canada, Mexico, and the United States to challenge one another’s anti-dumping and countervailing duties in front of a panel of representatives from each country. This is generally a much easier process than trying to challenge a trade practice in a U.S. court. Over the years, Canada has successfully used Chapter 19 to challenge the United States on its softwood lumber restrictions.

Side Letters Mexico and Canada get assurance the US won’t pound them with auto tariffs. Along with the new trade deal, the administration signed “side letters” allowing the two nations to mostly dodge Trump’s auto tariffs. The side letters say Canada and Mexico can continue sending about the same number of vehicles and parts across the border free of charge, regardless of whether auto tariffs go into effect down the road. Only parts above that quota could face tariffs.

Steel and Aluminum These tariffs stay in place (for now). Canada wanted the US to stop the 25 percent tariffs on Canadian steel. That didn’t happen — yet. The two countries are still discussing lifting those tariffs, but a senior White House official said Sunday that process is on a “completely separate track.”

Improved labor and environmental rights. The USMCA makes a number of significant upgrades to environmental and labor regulations, especially regarding Mexico. For example, the USMCA stipulates that Mexican trucks that cross the border into the United States must meet higher safety regulations and that Mexican workers must have more ability to organize and form unions. Some of these provisions might be difficult to enforce, but the Trump administration says it is committed to ensuring these happen — a reason U.S. labor unions and some Democrats are cheering the new rules.

Increased intellectual property protections. The new IP chapter is 63 pages and contains more-stringent protections for patents and trademarks, including for biotech, financial services, and even domain names. Many business leaders and legal experts believed these updates were necessary given that the original agreement was negotiated 25 years ago.

NAFTA Chapter 11, Is (mostly) gone. Chapter 11 is eliminated entirely for Canada and mostly for Mexico, except for some key industries such as energy and telecommunications. Chapter 11 gave companies and investors a special process to resolve disputes with one of the governments in NAFTA. The idea was that if investors put a lot of money into a project and then the government changed the rules, there was a clear dispute process — outside the court system — where investors could get their problem resolved.

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