U.S. Proposes USMCA Tariff Incentives for Coordinated Trade Policies
The United States’ top trade official says he’s pushing for changes to continental trade rules to prioritize U.S. content in manufacturing supply chains, but sees a path to preferential tariff rates in North America if Canada and Mexico co-operate with external tariffs on other countries.
At the same time, Jamieson Greer warned that negotiations with Canada around the future of the country’s auto sector could be difficult, while discussions about trade in commodities should prove easier.
Mr. Greer, the U.S. Trade Representative, was speaking in Washington on Tuesday, one day before travelling to Mexico City for the first round of formal bilateral negotiations ahead of the six-year review of the United States-Mexico-Canada trade agreement.
Canada has not yet started formal talks with the U.S. and won’t be at the negotiating table this week in Mexico City. The three governments have to decide on July 1 whether to extend the agreement for 16 years or move to a period of annual reviews for 10 years. Officials from all three countries have said they expect the latter scenario and expect to continue negotiations after July 1.
“I think that over the course of these negotiations, we are going to be talking about rules of origin in a way that enhances U.S. content in these goods,” Mr. Greer said.
He added that negotiations would also focus on external tariff co-ordination, with the goal of reducing the amount of Chinese products entering U.S. supply chains through Canada and Mexico.
U.S. tariffs on Mexico and Canada aren’t going away, he said. ”We’re going to have tariffs as long as we have a giant trade deficit.”
“My sense, though, is if we can come to good terms with Mexico and others in the region on external tariffs, it makes it easier to give preferential treatment to folks in the region.”
He noted that Mexico had already taken steps in this direction, recently imposing some 1,400 tariffs on countries with which it does not have a free-trade agreement.
“At the end of the day, frankly, for national security reasons, I want to have our supply chain sourced from this hemisphere. From North America,” he said.
Ottawa has recently signalled an openness to this type of “Fortress North America” approach. But Prime Minister Mark Carney has said he wants to see the U.S. lower its sectoral tariffs on automobiles, steel, aluminum, copper and wood products in return for moves toward deeper integration in key sectors.
Mr. Greer said that negotiations with Mexico are proceeding much more smoothly than with Canada and complained about the fact that Ottawa retaliated against U.S. tariffs last year.
Most other countries grudgingly accepted that the U.S., under President Donald Trump, has moved in a protectionist direction, and offered concessions to avoid threats of even higher tariffs, he said.
“Canada’s approach has been different … Two countries in the world retaliated against us: The People’s Republic of China and Canada. So they’re just in a different spot, and it’s hard to see necessarily where that ends.”
He acknowledged that Canada and the U.S. continue to co-operate well across a range of commodity sectors, where trade has remained largely tariff free. These include energy, minerals and fertilizer.
But he warned that discussions about Canadian manufacturing industries, particularly the auto sector, could prove difficult, given Mr. Trump’s goals of bringing auto production back to the U.S.
“If you’re going to sell here, we want you to build here,” Mr. Greer said of the auto industry. “So, I think on some of these issues it’s going to be a challenging negotiation [with Canada]. But in some sectors of the economy it has been fine, and it will be fine.”
Canadian auto industry representatives expect the U.S. to push for stricter regional and U.S.-specific content rules for automobiles. Mr. Greer has also said previously that tighter rules of origin could be applied to other industries.
The path forward for the USMCA talks remains opaque. Mr. Greer has said in the past that he wants to maintain the “pillars” of the agreement, but will also look to layer separate bilateral deals with Mexico City and Ottawa on top of the trilateral agreement.
The path forward for the USMCA talks remains opaque. Mr. Greer has said in the past that he wants to maintain the “pillars” of the agreement, but will also look to layer separate bilateral deals with Mexico City and Ottawa on top of the trilateral agreement.
This article was first reported by The Globe and Mail
