but they\u2019re not going to meet it.<\/a> That\u2019s not a hard cut-off. If the governments don\u2019t agree to a 16-year renewal by then, annual reviews would become the default, and they could still reach agreement on the longer-term option months or even years later. <\/p>\nThe worst outcome for many industries would be the trilateral deal falling apart. But they\u2019re also worried about losing long-term stability, especially where investment decisions have a multi-year runway. <\/p>\n
\u201cEven though we don\u2019t fall off a cliff on July 2, obviously the longer this goes on, the worse it is for businesses who are looking to make investments and to know and understand what the rules will be, so they can operate accordingly,\u201d said Blake Harden, a managing director at EY\u2019s Washington Council.<\/p>\n
Long-Term Renewal<\/p>\n
A 16-year renewal would benefit manufacturing sectors like the automotive industry, given the timeline to bring a new product to market.<\/p>\n
The auto industry makes model line decisions on a five-to-seven year time frame, said Jennifer Safavian, president and CEO of Autos Drive America, which represents international automakers with US manufacturing operations, including Toyota and Volkwagen.<\/p>\n
\u201cA lot of investments are dependent on those decisions, but the uncertainty of USMCA really calls into question where those investments should be made,\u201d and how soon, she said. <\/p>\n
Automakers and their suppliers are currently holding off on important investment decisions because of uncertainty around the agreement, she added.<\/p>\n
If the annual reviews were to go on for ten years, \u201cit would be very disruptive for the industry,\u201d she said.<\/p>\n
The auto industry is among those most affected by USMCA, as parts often cross North American borders multiple times during the manufacturing process. Changes to the agreement\u2019s rules on the amount of regional content required to qualify for preferential tariff treatment, for example, could leave companies scrambling.<\/p>\n
Consumer technology companies would also struggle to quickly meet new regional content requirements, said Ed Brzytwa, vice president of international trade at the Consumer Technology Association.<\/p>\n
\u201cMany of the components and sub components are still made outside of North America today,\u201d he said. \u201cMaybe that will change over time. But if they tried to impose a very onerous rule of origin right now, many of these products would not qualify.\u201d<\/p>\n
The 16-year renewal would also include another joint review. <\/p>\n
Annual Review<\/p>\n
Trade groups are largely expecting annual reviews to be the most likely outcome.<\/p>\n
\u201cI think everyone is of the same mindset that we will have an annual review going forward, versus a 16-year,\u201d said Beth Hughes, vice president of trade and customs policy at the American Apparel and Footwear Association.<\/p>\n
The apparel and footwear industry could get the certainty it needs from that outcome, Hughes said\u2014as long as the agreement remains trilateral.<\/p>\n
Soy farmers\u2014already hit hard by tariffs\u2014are concerned that \u201cif this goes to either bilaterals or yearly review, that inserts instability into the trade relationship at a time when farmers desperately need more stability, and not less of it,\u201d said Virginia Houston, speaking in her capacity as director of government affairs at the American Soybean Association. She has since joined the American Farm Bureau Federation. <\/p>\n
Dissolution of Trilateral Agreement<\/p>\n
There\u2019s also the nuclear option: Any of the countries can withdraw from the agreement six months after providing written notice. This option isn\u2019t tied to the July review. <\/p>\n
\u201cI think withdrawal is very unlikely,\u201d said Christopher Sands, who leads the USMCA initiative at the Brookings Institution. \u201cIt\u2019s maybe a 5% chance, but a withdrawal would create immediate negative effect.\u201d<\/p>\n
There are currently frictions between the US and Canada. US-Mexico progress appears to be farther along: Delegates from both governments met in Mexico City in May<\/a>, with further rounds scheduled through the week of July 20\u2014another sign that negotiations will extend past July 1.<\/p>\nBreaking apart the trilateral agreement \u201cwould be very problematic for many US companies,\u201d and introduce compliance costs and difficulties, said Vanessa Sciarra, vice president for trade and international competitiveness at the American Clean Power Association.<\/p>\n
\u201cEverything doesn\u2019t work perfectly all the time\u2014that\u2019s why you have disputes,\u201d she added. \u201cBut generally speaking, those of us who are business and trade lawyers will tell you that we\u2019re firmly behind USMCA as a means of regional economic integration.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Industries want to see this summer\u2019s negotiations on the US-Mexico-Canada trade agreement usher in more than a decade…\n","protected":false},"author":2,"featured_media":82635,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[32422,17,6436,4665,32423,6951],"class_list":["post-82634","post","type-post","status-publish","format-standard","has-post-thumbnail","category-canada","tag-agriculture-regulation","tag-canada","tag-customs-duties","tag-foreign-investment","tag-regional-trade-agreements","tag-trade-negotiations"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/82634","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/comments?post=82634"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/82634\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media\/82635"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media?parent=82634"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/categories?post=82634"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/tags?post=82634"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}