Mexican Private Industry Also Urges Government Not to Rush Into USMCA
The language of the U.S.-Mexico-Canada Agreement says that in order for the treaty to take effect on June 1 -- as U.S. officials have told Congress they want -- the countries would have to agree that they're ready 12 days from now. Kenneth Smith Ramos, a former top negotiator of the NAFTA rewrite, said the three countries cannot say they've completed their internal procedures by then. “#NotHappening,” he wrote in English at the end of a tweet in Spanish.
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Antonio Ortiz-Mena, senior vice president at Albright Stonebridge Group who used to be Mexico's top diplomat in Washington for economic affairs, said the uniform regulations have to be done by June 1 if USMCA is to take effect that day. He said it's not impossible, but it's difficult to get to that notification at the end of March. “If push comes to shove ... I would tend to agree with Ken,” he said, referring to Smith Ramos' tweets.
But, he noted, “It’s not June 1st or bust. This is huge news the fact that USMCA will very soon come into force.” Down in Mexico City, Foley & Lardner Partner Alejandro Gomez Strozzi, who advises multinational steel and auto companies, said that when it comes to labor obligations that Mexico undertook under USMCA, “I believe Mexico has done its share and is ready to go.”
But he believes the drafts of the uniform regulations aren't very close to being finished. “I know there is a working group that has been working in them for some time. But even though I was part of the room next door in the Mexican system, I have not been able to see them and opine,” he said. The room next door means he was in the private sector advising circles during negotiations.
“Whatever versions are available they have not left the immediate circle that are working on them. Even though I am a specialist, I have not seen them,” he said, which suggests to him that they're not very close to being done. “There are a lot of open-ended issues,” he said, or as negotiators like to say, “there are a number of brackets” in the text.
Gomez Strozzi, interviewed by phone on March 19, said one example of details that have to be worked out is how customs officials will judge if a car has the required 70% steel content. “Can this be done at the model level? The factory level? At the specific line of production level?” With regard to the labor requirement, it's not clear if suppliers would be able to contribute to the standard, and how the chain of information would move to do that.
Gomez Strozzi said, “I think there is a significant amount of pressure on behalf of national governments to move forward,” not just from the Office of the U.S. Trade Representative or the White House. He said in Mexico, the leader of the Senate said he'd like to see entry into force May 1, not June 1. “At the same level, we will see the cry for patience or cry for serenity on behalf of the private sector,” he said. All Mexico's automotive companies, an organization that represents original equipment manufacturers and one that represents heavy equipment manufacturers, all “have expressed their need for patience and hard work in an orderly manner.”
Gomez Strozzi said he thinks politicians, who want to reassure investors, may be losing sight of the fact that NAFTA is still operating. “I do not see the need to rush of having this operational,” he said. “This requires a lot of details to fine tune and those details do not need to be rushed.”
He said government officials need to meet with auto manufacturers -- not just lobbyists -- “who know what can be done or cannot be done before June 1.” If it is imposed on the companies that need to adjust to the rules of origin changes, it won't be as practical as if the rules are done collaboratively, he said.
Ortiz-Mena, also speaking by phone on March 19, said he thinks a summer date for coming into effect will be encouraging to business, and said, “We need to send a positive signal to markets.”
But he worries about whether the labor dispute segments will introduce problems down the road. “I am concerned about frivolous claims,” he said, with a toll-free number open to anonymous complaints. He's worried the labor environment in Mexico will be politicized, and cited the letter from Democratic lawmakers to the CEO of Goodyear.
Ortiz-Mena acknowledged that it may seem strange to be talking about how to manage North American auto supply chains as the supply chain grinds to a halt. He said Audi and General Motors are both shutting down Mexican production. Most foreign and domestic automakers have announced at least temporary shutdowns in the U.S., and Tier 1 suppliers are starting to respond with shutdowns of their own.
“Things are really, really dicey,” Ortiz-Mena said, and noted the saying in Mexico that when “the U.S. gets a cold, Mexico gets pneumonia. What if the U.S. gets pneumonia?”