USMCA, In Force, Offers Challenges, Opportunities

Written by William C. Vantuono, Editor-in-Chief
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As the U.S.-Mexico-Canadian trade agreement (USMCA) officially becomes the governing statute for commerce across North America, Marc Brazeau, President and Chief Executive Officer of the Railway Association of Canada (RAC), Iker de Luisa Plazas, Director General of Asociacion Mexicana de Ferrocarriles (AMF) and Ian Jefferies, President and CEO of the Association of American Railroads (AAR) issued the following statement:

“As the United States–Mexico–Canada Agreement (USMCA) takes effect, competitiveness, growth and social well-being are expected. In this new stage of trilateral cooperation, freight rail plays a fundamental role, as it did for NAFTA, a period in which the sector became an integrated and unique service in the world.

Ian Jefferies

“The new agreement constitutes a message of confidence and stability for Mexico, Canada and the United States that will encourage railway companies to respond to the needs of an increasing volume of goods in the North American market.

“In 2020 the railway industry has been an essential activity in the framework of the Covid-19 pandemic and its contribution is expected to be decisive for the reactivation of logistics chains and economic growth in the region.

“Mexico, United States and Canada are intricately linked by companies that have a presence between them, which depend on a constant flow of raw materials and components to create and transport goods. Freight rail is the safest, most sustainable and most effective network for this purpose.”

Pat Ottensmeyer

Kansas City Southern President and CEO Pat Ottensmeyer, Railway Age’s 2020 Railroader of the Year, played an integral role in USMCA negotiations and implementation. In the July 2020 issue’s Midyear Report, he described the “North American Moment,” a juxtaposition of “challenges and opportunities”:

“The USMCA’s entry into force marks the beginning of a historic new chapter for North American trade by modernizing the 25-year-old North American Free Trade Agreement (NAFTA) in a manner designed to spur robust economic growth across the continent,” Ottensmeyer noted. “The agreement contains global best-in-class trade provisions in areas such as agricultural market access, digital trade, financial services, regulatory policy, and numerous other sectors. These enhancements will deliver more jobs, provide stronger labor protections, and expand market access, creating new opportunities for American workers, farmers and ranchers.

 “The COVID-19 global health pandemic has caused multi-national companies to rethink their supply chain strategies. The strained relationship between the USMCA partners and China has introduced an emerging thesis in supply chain leaders, informally referred to as the ‘ABC (Anywhere But China) Strategy’ as they think about their future sourcing and procurement strategies.

“On April 24, 2020, U.S. Trade Representative (USTR) Robert Lighthizer notified Congress that Canada and Mexico took measures necessary to comply with their commitments under USMCA. Following that notification to Congress, the U.S. became the third country to notify the other parties that it had completed its domestic procedures to implement the agreement—the final step necessary for the USMCA to enter into force.

Here is an excerpt of Ambassador Lighthizer’s statement to Congress: “The crisis and recovery from the COVID-19 pandemic demonstrates that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America. The USMCA’s entry into force is a landmark achievement in that effort. USTR will continue working to ensure a smooth implementation of the USMCA so that American workers and businesses can enjoy the benefits of the new agreement.”

“The combination of approval, and now entry into force, of USMCA on July 1, 2020, coupled with the emerging desire of global supply chain leaders to disfavor China, presents an enormous opportunity for investment in North America,” said Ottensmeyer. “North American railroads will play a critical role in facilitating this opportunity and leading our countries out of the current recession. Railroads connect the U.S., Mexico and Canada, and our networks are the backbone of North American supply chains.”

Here is the challenge, according to Ottensmeyer:

“Misalignment of government policy across North America, such as the current situation caused by the lack of coordination of ‘essential services’ in the three countries, could potentially result in the underperformance of existing, well-established supply chains. If North America is able to better coordinate health and safety initiatives with other important issues such as security (including cyber), efficiency and workforce development, to name a few, there is a path for the continent to emerge as an even stronger force in global manufacturing and logistics.

“Tighter coordination and alignment of priorities between the private sector and the three governments would be extremely helpful in charting a sustainable course of action to pursue this opportunity. USMCA calls for the establishment of a ‘Committee for Competitiveness’ (Chapter 21). Specifically, this Chapter calls for this committee to be comprised by ‘authorities’ from the three countries, but also includes a sub-section allowing for ‘consultation’ of other parties. We would strongly encourage the authorities to use this moment to establish a meaningful, high-level interaction that includes key members of the private sector with this Committee for Competitiveness to meet the objectives of Chapter 21 and to assure that, unlike the 25-year-old NAFTA, the new USMCA stays current and relevant as circumstances change.”

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