WASHINGTON (AP) \u2014 Tourists from Chattanooga check into beach resorts in Cancun. Canadian auto parts feed factories in the American Midwest \u2013 and vice versa. Happy hour revelers raise glasses of Mexican tequila and mezcal at bars in Seattle.<\/p>\n
It adds up. The United States trades $1.9 trillion a year \u2014 $5 billion a day \u2014 worth of goods and services with its neighbors, Canada and Mexico. They have supplanted China<\/a> to become America\u2019s top two trading partners. <\/p>\n So the stakes are high when it comes to fiddling with the rules that govern trade between the three countries. And after a year of President Donald Trump\u2019s chaotic tariff policies, many U.S., Canadian and Mexican businesses would welcome the return of stability across North America.<\/p>\n They are not likely to get it.<\/p>\n The regional trade pact \u2014 the U.S.-Mexico-Canada Agreement or USMCA \u2014 that Trump negotiated and boasted<\/a> about came up for renewal Wednesday, starting a process that is likely to last months, maybe longer.<\/p>\n And the path forward is lined with landmines.<\/p>\n \u201cThere\u2019s going to be a lot of drama this summer,\u201d Diego Marroqu\u00edn Bitar, a fellow in the America\u2019s program at the Center for Strategic and International Studies, said last week at a USMCA forum sponsored by the Cato Institute.<\/p>\n A bumpy road ahead for North American trade<\/p>\n The U.S. is making demands that could effectively force Canada and Mexico to surrender some automaking production to the United States. That might bring more auto factory jobs to the United States. But it would also upend established supply chains and would push up U.S. prices for new cars that now average nearly $50,000 at a time when American consumers are already frustrated about the high cost of living.<\/p>\n Trump, characteristically, has added to the tension by threatening to pull out of his own agreement altogether.<\/p>\n In 2020, the USMCA replaced the 1994 North American Free Trade Agreement, which tore down most trade barriers between the three North American countries.<\/p>\n Trump and other critics had called NAFTA a job killer because it encouraged U.S. companies to move factories south of the border to take advantage of low-wage Mexican labor, then ship goods back to the United States duty free.<\/p>\n His USMCA ended up being similar to NAFTA<\/a> \u2014 though it pressured factories to pay higher wages and make sure that more of what they made originated in North America in an effort to prevent Chinese products from slipping across regional borders duty free.<\/p>\n To renew or not to renew?<\/p>\n The USMCA included a novel provision requiring the pact to be renewed every six years. That deadline was Wednesday. <\/p>\n The three countries met virtually Wednesday, but U.S. Trade Representative Jamieson Greer said in a statement that the United States was not ready to renew the pact as it is for another 16 years \u2014 which would have been until 2042. The U.S. wants changes to the agreement to reduce its trade deficits with Canada and Mexico and to resolve specific disputes over issues such as Canada\u2019s protection of its dairy industry.<\/p>\n The USMCA remains in effect while the three countries continue to work on ways to resolve their differences; they have until the current term ends in 2036 to reach an agreement. Otherwise, the pact expires.<\/p>\n <\/p>\n \n Sign up for Morning Wire: Mexican Economy Secretary Marcelo Ebrard said in a video posted on his social media accounts that he was confident the review of the treaty could be concluded \u201cwithin a reasonable time frame.\u201d<\/p>\n \u201cWe\u2019re in no rush, but we also don\u2019t want there to be any uncertainty, which is why we need to try to reach an agreement on many issues,\u201d he said. \u201cOur goal is for that review to have fewer outstanding issues each year.\u201d<\/p>\n Meantime, any USMCA country can pull out of the pact provided it gives its two partners six months\u2019 notice \u2014 a red buzzer that Canada and Mexico, dependent on trade with the United States, fear Trump just might push.<\/p>\n Trump, after all, said in June that he was \u201cnot looking to renew\u2019\u2019 the trade pact with Canada and Mexico. \u201cWe don\u2019t need anything that they have,\u201d he said. <\/p>\n Canada is out in the cold \u2014 so far<\/p>\n The United States and Mexico have held talks on renewing the trade agreement. But Canada has so far been stuck on the sidelines.<\/p>\n Patrick Childress, a partner at the Holland & Knight law firm and a former U.S. trade negotiator, said: \u201cThe danger for Canada is this: that the U.S. government and the Mexican government reach agreement on changes to core provisions of the treaty and then show up in Ottawa and say: \u2018Here\u2019s what we\u2019ve agreed to. You can take it or leave it.\u2019\u2019\u2019<\/p>\n Canadian Prime Minister Mark Carney said that the three trading partners plan to meet virtually on Wednesday, adding: \u201cI\u2019m not looking for my pen.\u201d<\/p>\n Carney later said in French his priority is to update the USMCA and that it is impossible for the U.S. to have a new agreement without the approval of Congress. <\/p>\n Pushing production to the United States<\/p>\n The U.S. wants a refreshed trade pact to do more to make sure that Chinese goods don\u2019t get in through the back door. But the most contentious issue is a U.S. push to require that more products are made in North America \u2014 and specifically the United States.<\/p>\n The USMCA included a requirement that automotive products must be 75% made in North America<\/a> \u2014 up from 62.5% under NAFTA \u2014 to qualify for duty-free treatment.<\/p>\n The U.S. wants to push the 75% threshold even higher but it won\u2019t be easy. Automakers already \u201chave been fine-tuning their supply chains for years to be able to hit that 75% mark,\u201d Childress said. They would need time to meet the higher standard.<\/p>\n
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