Steel Industry Welcomes New North American Trade Pact

Written by Tim Triplett

In stark contrast to the mostly bad news related to the coronavirus pandemic, the North American steel industry is celebrating the new USMCA trade agreement that took effect last week.

“Entry into force of the USMCA represents a significant achievement by the United States, Canada and Mexico that will benefit the North American steel industry and its customers throughout the region,” said Kevin Dempsey, interim president and CEO of the American Iron and Steel Institute (AISI). “For U.S. producers of steel, Canada and Mexico are our two most important export markets, together accounting for nearly 90 percent of all U.S. steel mill exports. By incentivizing the use of North American steel through its enhanced rules of origin, this agreement will help keep manufacturing supply chains strong for goods made primarily from steel. And the USMCA will promote increased cooperation among the three North American governments to address unfair trade practices such as transshipment and the circumvention and evasion of trade remedy orders.”

“The USMCA contains significant improvements and modernized approaches to rules of origin, automotive content requirements and labor protections for North American workers. These and other provisions represent the culmination of efforts to update the 25-year-old NAFTA and will help create jobs and expand market access for steel producers in the region,” added Philip K. Bell, president of the Steel Manufacturers Association (SMA).

The new agreement, which took effect July 1, enhances the automotive rules of origin and sets higher regional value content requirements for vehicles and key automotive parts. Key elements of the USMCA automotive rules of origin that directly impact the use of steel include:

• An increase in the regional value content requirement for passenger vehicles and light trucks to 75 percent. 

• Higher regional value content requirements for automotive components.

• A requirement that 70 percent of the value of auto producers’ steel and aluminum purchases originate in North America. 

• And a first-of-its-kind labor value content rule which states that 40-45 percent of a vehicle must be produced by employees earning an average of $16 per hour.

Within five years, USMCA will create $34 billion in new automotive manufacturing investments in the United States and $23 billion in new annual purchases of U.S.-made automotive parts, according to government estimates.

Chris Spear, president and CEO of the American Trucking Associations, called July 1 “a tremendous day” as USMCA took effect. “It is the first significant revision in our nation’s trading relationship in nearly three decades and will foster growth in all three nations at a time when the economy can use a shot in the arm.”

Ratified in January, the USMCA is projected to increase annual U.S. exports to Canada and Mexico by a combined $33 billion above the current NAFTA baseline. The agreement is also expected to increase U.S. GDP by $68 billion, stimulating broad sectors of the economy that the trucking industry services, like agriculture and manufacturing, said ATA.

“Very little changes for trucking today, but going forward, USMCA will not only keep industry in North America, benefiting trucking, it will likely attract new factories and economic activity, which will lead to more trucking activity,” said ATA Chief Economist Bob Costello. “International trade, and specifically trade with the U.S., Canada and Mexico, are tremendous drivers of freight for our industry. I expect that growth related to USMCA will provide a real boost for trucking in the coming years.”

While the Trump administration claims victory in replacing NAFTA, much work remains to put USMCA’s provisions into practice. “The USW sought for years to replace the failed North American Free Trade Agreement (NAFTA) with an agreement that was fair to workers, that ensured good jobs for families and communities in all three countries, and that protected our planet for future generations. While the new version of NAFTA, the USMCA, gets us closer to those goals, there is still a lot of work to be done to ensure that this new deal is effective in protecting good jobs, preserving our environment, and ensuring workers’ rights,” said USW President Tom Conway.

He added: “We also can’t ignore that today’s implementation of the USMCA comes at a perilous time for all workers. The COVID-19 pandemic has taken thousands of lives, cost millions their jobs, and put the health of millions more at risk. Now, more than ever, we need to protect working people and fight for good, family-supporting jobs for people across North America.

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