Deputy USTR Says Enforcement Puts USMCA Credibility on the Line

Deputy U.S. Trade Representative Jayme White, speaking during a panel discussion with representatives from USMCA partners, said the NAFTA rewrite's credibility is on the line if enforcement is weak. White, who discussed USMCA implementation on a Brookings Institution panel along with a Canadian minister and a Mexican senator who leads that body's Special Committee for USMCA Implementation, said if promises on environmental rules, labor standards and energy aren't fulfilled, workers will say: "Well, you don't enforce it."

Simon Kennedy, Canada's deputy minister of innovation, science and economic development, said there's a lot of attention paid to various disputes between the three countries, but that the amount of trade that goes across Canada's border to the U.S. "without any friction at all" is staggering.

The USMCA included a sunset clause, in which, six years after entry into force, the countries evaluate whether they want it to continue past the first 16 years; if one country does not sign for renewal, they meet every year for the next 10 years to see if renewal can be agreed to. Kennedy said he hopes the sunset review "will all go smoothly."

As a result of the pandemic and the invasion of Ukraine, policymakers are worrying more than they ever did before about the security and resiliency of supply chains. He said that Canada realized during the pandemic it did not have the kind of vaccine manufacturing capacity to make the COVID vaccines, and the government has resolved never to be wholly import dependent on vaccines again.

Kennedy said that the U.S. wants to have more secure supply chains for electric vehicle batteries, critical minerals, semiconductors and "a whole range of other areas," and he said that the nearshoring and onshoring that requires will not happen without government involvement.

Kennedy said facilitating trade is increasingly about border rules, labor mobility and regulations, rather than tariffs.

He said the Inflation Reduction Act, which aims to localize the EV and EV battery supply chain, is not protectionist, since it allows Canadian-built and Mexican-built cars to qualify for tax incentives.

However, he said the fact that the U.S. is spending so much to reward battery production in the U.S. "presents a challenge" to both Canada and Europe. But he said he expects voters' support for free trade to grow as a result.

"There’s going to be a manufacturing renaissance … there may be an opportunity to tell a different storyline about the future trading relationship and our work together," he said.

Another panel discussion at the same Brookings event hosted Cathy Feingold, director of the AFL-CIO's international department, who said that labor unions were too focused on the rapid response mechanism and neglected their issues in digital trade. She said foreign contractors for social media companies have poor working conditions, and the AFL-CIO is bringing its focus to bear on those issues.

However, the AFL-CIO is happy with the rapid response tool, and she said that they are brainstorming with the administration how such a provision could be incorporated into the Americas Partnership for Economic Prosperity, "when there is no market access to take away."

Kenneth Smith Ramos, who negotiated the NAFTA rewrite when he was in the Mexican government, said he wonders if the rapid response cases have been influenced by politics, since each one was in the auto sector. But, he said, they seem to be adjudicated fairly.