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USMCA Consideration May Not Proceed Without Removal of Steel/Aluminium Tariffs on Canada and Mexico

Senate Finance Committee Chair Chuck Grassley (Republican-Iowa) warned this week that the trade agreement the Trump administration negotiated to replace the North American Free Trade Agreement is “dead” unless the Section 232 tariffs on steel and aluminium products imported from Canada and Mexico are lifted.

In a 29 April op-ed in The Wall Street Journal, Grassley praised both NAFTA and the U.S.-Mexico-Canada Agreement. He pointed out that agricultural exports to Canada and Mexico have more than quadrupled since NAFTA was enacted in 1994 and that trade with these two countries supports 12 million U.S. jobs. The USMCA would offer further benefits to U.S. workers, businesses and farmers, he said, including “more market access for agriculture, new commitments in critical areas such as customs, digital trade and intellectual property, and the lowering of non-tariff barriers.”

However, Grassley warned that “there is no appetite in Congress to debate USMCA” while the administration’s national security-related tariffs on steel and aluminium products from its NAFTA partners remain in pace. “Many Americans have been harmed” by these tariffs and the retaliatory duties Canada and Mexico have imposed on imports of U.S. goods, he said, which the Cato Institute said have resulted in U.S. exports to Canada and Mexico falling by 25 percent and 10 percent, respectively. Grassley called on the administration to promptly lift the tariffs and instead work with U.S. allies to address “the true source” of the underlying problem, which is production overcapacity in mainland China.

In the meantime, Mexico’s Senate approved this week stronger protections for Mexican workers. According to press sources, U.S. Democrat lawmakers have insisted that Mexico enact these reforms, and that the USMCA be amended to include stronger provisions to enforce labour laws, before they will agree to consider the USMCA. Both Canada and Mexico have rejected the idea of reopening the agreement.

U.S. Trade Representative Robert Lighthizer said the new law is “exactly what labor leaders in the United States and Mexico have sought for decades” and pledged to work with U.S. lawmakers and the Mexican government to “ensure these reforms are implemented and enforced.” With this step now taken, Grassley called on Democrats to “engage in good faith to pass USMCA this year.”

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