Trade Cases

USMCA Implementation Uncertain Due to COVID-19

Written by Sandy Williams

Three auto organizations have sent a joint letter to Congress requesting a delay for entry into force of the USMCA, currently scheduled for June 1.

The CEOs of the Alliance for Automotive Innovation, the National Automobile Dealers Association (NADA) and the Motor & Equipment Manufacturers Association (MEMA) suggested several policy initiatives to address the COVID-19 impact and speed the economy on its way to a recovery. They include:

  • The creation of robust credit facilities to provide loans and loan guarantees to large employers, medium-size manufacturers and small businesses;
  • Ensuring that businesses with more than 500 employees provide paid leave for their employees due to COVID-19 and are able to receive a tax deduction or credit to maintain their workforce;
  • Delaying or deferring 2020 quarterly federal tax payments;
  • Expanding and extending expensing for equipment and machinery; and
  • Delaying the June 1 date of entry into force for the USMCA.

“Stalling sales and halted production threatens a vast network of businesses in every state, which is why Congress and the administration must take important steps to pass a robust economic stimulus package that can assist businesses large and small as they work to confront the challenges they face due to events beyond their control,” said John Bozella, Peter Welch and Bill Long. “Enacting these policies in the immediate term would help moderate the impact of the economic situation our nation faces, which will assist businesses and workers as we work to get various parts of our economy moving again in the coming weeks and months.”

The group’s letter did not specify the benefits of delaying implementation of the USMCA, although the inference is that measures should be focused on the pandemic at this time. Other issues for the automotive industry regarding labor and sourcing have yet to be completely resolved.

Sen. Chuck Grassley supports a delay of USMCA due to the challenges facing the auto industry because of COVID-19. In a recent comments, Grassley said: “I’m especially concerned that the June 1 date presents unique challenges for the U.S. auto industry when it is already facing significant supply chain disruption due to COVID-19. As we learned in 2009, the health of the auto industry is critical to the health of the entire American economy. I urge the administration to take very seriously the concerns expressed by the highest levels of the auto industry to ensure a reasonable timeline for entry-into-force of the U.S.-Mexico-Canadian Agreement auto regulations. It would be prudent right now to let these companies focus instead on the health of their workforce and supply chain.”

The Trump administration is taking several policy steps to mitigate the impact of the coronavirus on the U.S. economy. Delaying the USMCA, however, is not one of them.

The administration still hopes to have the USMCA in effect by June 1. Mexico’s Economy Minister Graciela Graciela Márquez Colín agrees and is anxious to complete implementation, stating that it “could be a very important driver for investment and commerce.”

Canadian officials are more skeptical, with some members of the government’s advisory group saying the June 1 implementation is unlikely. “There was a general sense that it ain’t going to happen,” Canadian Labor Congress President Hassan Yussuff told The Hill Times.

“I have had conversations with the folks in the [Global Affairs] department who were working on the negotiation of the agreement and [they] didn’t think the timeline will be met,” said Yussuff. “And I think, similarly, businesses are of the view that they would be requesting government to punt the timeline to something much different than the one that was agreed to.”

“I think this thing is pushed off for some time yet, until the COVID-19 pandemic has been defeated, and then I think governments will turn their mind as to what should be the effective date, given the distraction [for] everybody, including the folks [on] the business side who are hoping, of course, to be ready to take advantage of the new provisions of this agreement,” he added.

Mark Agnew, senior director of international policy at the Canadian Chamber of Commerce, said businesses are focused on coronavirus issues right now. “Given how all-consuming COVID has been, it is important for all three NAFTA governments to take a step back and look at perhaps some kind of grace period for certain issues within the agreement,” he said.

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