Politics
Canada joins Mexico’s official complaint that the United States violates the new trade pact on the supply of auto parts

Canada joins Mexico’s official complaint that the United States violates the new trade pact on the supply of auto parts

Canada today joins Mexico’s formal complaint requesting a dispute settlement panel over allegations that the United States is violating the Canada-United States-Mexico Trade Agreement on Trade, the new NAFTA, by insisting on a stricter way of interpreting a key provision concerning auto parts.

Motor vehicles are the primary commercial product manufactured between the three countries. Canada argues that the United States’ view of the trade agreement would make it more difficult for Canadian vehicles and basic auto parts – engines, transmissions and flywheels – to qualify duty free.

International Trade and Export Promotion Minister May Ng released a statement this morning claiming that the United States’ view on the rules is “inconsistent” with the three-country trade pact, which is entered into force in 2020.

“Canada, Mexico and the United States would all benefit from the certainty that CUSMA is implemented as negotiated, and Canada is optimistic that a dispute settlement panel will help ensure a swift resolution of this. question, ”Ng wrote.

Canada and Mexico have been working to resolve this dispute for over a year.

The dispute involves a technical issue in the Canada-United States-Mexico Agreement. The provision would require by 2025 that 75 percent of a vehicle and some basic components be manufactured domestically in order to qualify for duty-free treatment. Otherwise, the United States can impose tariffs under World Trade Organization rules.

This “rules of origin” provision was meant to encourage the “production and supply” of passenger cars and light trucks in North America to “deepen regional integration,” Ng wrote.

Before CUSMA came into effect in July 2020, only 62.5% of a vehicle had to be manufactured in the country to qualify for duty-free treatment.

Canada says US interpretation would be a burden

Mexico and Canada argue that if a base car part uses 75 percent regional manufacturing, it meets the agreement and meets a second condition for the entire car to meet the bar to be considered duty-free. . The United States disagrees, which could make it more difficult for entire vehicles to qualify to be considered tax-free.

A senior Canadian government official told CBC News that the US interpretation may be too onerous for the industry and regulators.

During the renegotiation of NAFTA in 2019, Canada, Mexico and the United States agreed on a dispute settlement mechanism that will now be used. A dispute settlement panel could hear arguments from nations.

Ng wrote that the Canadian government will continue to “stand up for our auto industry and our workers.”

“Canada, Mexico and the United States would all benefit from the certainty that CUSMA is implemented as negotiated, and Canada is optimistic that a dispute settlement panel will help ensure a swift resolution of this. question, ”Ng wrote.

The case is unrelated to the dispute between Canada and the United States over its electric vehicle tax incentive for vehicles made in the United States.

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