Trade Insiders Say Details in Uniform Regulations Helpful, Still Some Blanks

The president of the American Automotive Policy Council, former Missouri Gov. Matt Blunt, said the release of the uniform regulations in the U.S.-Mexico-Canada Agreement was so recent that it's too early “to give a definitive view of what needs to be clarified,” or is missing. But he said one of the really important asks of the automotive industry was granted -- an acknowledgement that importers and exporters would need the rest of the year to be ready for full compliance.

Blunt, who was speaking on a Washington International Trade Association panel June 4, said he wishes the government would provide examples, as it did for textile and apparel.

Jamieson Greer, a lawyer with King and Spalding, and until two months ago, the chief of staff at the Office of the U.S. Trade Representative, said there were no surprises between the draft implementing regulations and the final version, but there are additional details, which helps traders. He said some of those include key definitions of how to calculate the labor value content for autos -- though the industry is still waiting on the Department of Labor's approach to verifying LVC compliance. He said there's also more detail on how automakers will calculate steel and aluminum purchases.

Mexico's former chief negotiator of the NAFTA rewrite, Kenneth Smith Ramos, joined the panel from Mexico City. Smith Ramos said procedures for the rapid response teams for alleged labor violations are still being discussed among the countries' officials. “There's quite a bit of work left” in that arena, he said, as well as lots of work left to do for Mexico to implement its massive labor laws rewrite. Over four years, officials will have to review all labor contracts, make sure that new unions were chosen by secret ballot, and that workers received copies of their new contracts. He said, “it's sort of a titanic ask.”

There are also laws that must be changed in Mexico, such as giving Mexican Customs ex officio authority to do intellectual property inspections at the border.

“Overall, I think Mexico is ready to comply,” he said, given that “a lot of commitments don’t come into effect immediately July 1.”

Smith Ramos said Mexican stakeholders and officials are a bit worried about the rapid response labor mechanism, since the burden of proof is on the company, and because CBP can take action at the border prior to a decision. He said that provision is “incentive for possibly frivolous cases to be started. That could have a chilling effect on trade.”

Greer said that while it's true there's still a lot to be done, he believes even once the details are hashed out in the labor response process, there will be ways things will evolve once cases start. “There are going to be procedural questions come up that people didn’t think about,” he said.

But with regard to frivolous cases, he said that if Mexico believes Americans are using the labor response mechanism in bad faith, they can take that to dispute settlement, and if a panel says that Mexico was right, the U.S. would be barred from using the rapid response mechanism for two years. “The administration and labor movement are pretty invested for this to work,” he said. “They will be careful to bring cases that make sense.”

He also noted that the rapid response process builds in time for consultations before an investigation fully launches, and said it's one of many “circuit breakers built into the agreement.”

Smith Ramos said that new language around sanitary and phytosanitary standards will facilitate trade. But, he said, there are rumblings on both sides about potential ag disputes. He said that the question of using trade law to protect U.S. producers of fruits and vegetables that compete with Mexican imports could be an issue (see 2001130035).

He said Mexico is also concerned that the U.S. wants to expand enhanced inspections beyond tomatoes. He said the president talked about banning the import of live cattle. “We don’t want to revive the entire country of origin labeling issue again,” he said.

Mexican actions that concern U.S. agricultural exporters include what he called “quite a lot of regulatory backtracking primarily by the environmental ministry.”

He said Mexico is suspending import permits for some agricultural biotechnology products, even though they are in compliance with Mexican biosafety law. He said the ministry stated that it is banning glyphosate imports. There's also a proposal to undo a provision that allows ethanol blending in gasoline.

“So, hopefully those will be able to be cleared off the table, and we won’t have a dispute in agriculture,” Smith Ramos said.