OTTAWA, Jan 11 (Reuters) – Canada and Mexico have won their challenge to the U.S. interpretation of content rules for autos under a new North American trade deal, an arbitration panel ruled on Wednesday. a decision that favors developers north and south of the U.S. border.
Last year Canada and Mexico filed a complaint against the United States over how to apply auto sector information requirements under the United States-Mexico-Canada free trade agreement (USMCA), which went into effect on 2020.
The US interpretation of the rules is “inconsistent” with the USMCA, the panel said in its ruling.
“This decision is good for Canada and Mexico,” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association.
Canada is “pleased to see that the dispute settlement process upholds our rights and commitments to the USMCA,” Canadian Trade Minister Mary Ng said in a statement.
“This is great news,” Tatiana Clouthier, Mexico’s former economy minister, said in a Twitter video. “That helps the entire automotive industry in the North American region tremendously.”
The decision is “disappointing,” said Adam Hodge, a spokesman for the United States Trade Representative’s office, adding that the decision could result in “fewer American jobs.”
Under the USMCA, the United States must now agree with Canada and Mexico on how to implement the panel’s decision, or face retaliatory tariffs.
“We are reviewing the report and considering next steps,” Hodge said. The USTR will now “engage with Mexico and Canada on a possible resolution of the dispute,” Hodge said.
“In the coming days, Mexico will start a process of dialogue and cooperation with its trading partners,” Mexico’s economy ministry said in a statement after the decision.
The decision was announced during a separate USMCA dispute focusing on joint jurisdiction between the United States and Canada against Mexico. Ottawa and Washington argue that Mexico’s strong policies put US and Canadian firms at a disadvantage, while Mexico has defended its policies and says it is not breaking the rules.
Under the USMCA, 75% of a car’s parts must come from North America to receive tax-free status, but the United States does not agree on how to calculate that number.
Mexico and Canada have said that if a “core component,” such as an engine or transmission, contains 75% of the environmental content, the USMCA allows that number to be rounded up to 100% when calculating the broader environmental content requirement. the whole car.
The United States has stated that the “main component” should not be collected when determining the total vehicle content.
Volpe said that the decision is also important because it shows that disagreements can be resolved under the rules of the new trade agreement.
“It shows that the dispute resolution vehicle within the USMCA is working,” Volpe said.
Reporting by Steve Scherer in Ottawa; Additional reporting by Dave Graham and Kylie Madry in Mexico City, and David Lawder in Washington; Edited by Paul Simao and Aurora Ellis
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