Friction emerges in North America one year into trade deal

WASHINGTON, United States — One year after it took effect in the midst of a record economic downturn, the United States-Mexico-Canada Agreement (USMCA) has yet to end trading friction between the North American allies.

The three countries said the new treaty would benefit their economies and workers but, as the anniversary nears on Thursday, the neighbors have already entered into a range of disputes -- many of which have seen the United States object to Mexican or Canadian practices.

"Most of the focus on USMCA over the next several years is going to be on the disputes," said Edward Alden, an expert at the Council on Foreign Relations.

USMCA replaced the North American Free Trade Agreement, which had been in force since 1994, and which Alden said had envisioned the continent's three economies at one point becoming a single market, like the European Union.

That vision appears to be dead, at least for now.

"USMCA is very much the rules for three separate North American economies to cooperate, where they can, and rules for fighting where they can't cooperate," Alden said.

While the disputes between the countries have made headlines, Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, credited the deal with "removing the cloud of uncertainty" over continental commerce.

"That creates a better atmosphere for trade and investment than we've had in some time," he said.

Former president Donald Trump, who was known for his bellicose rhetoric even towards American allies, negotiated the USMCA, but his successor President Joe Biden could change policies.

But there are also signs that even under the new government, the squabbling will continue.

- Ready to fight -

Canada is perhaps Washington's closest ally, but when it comes to trade, the neighbors have several differences.

The United States has long-running disputes over the Canadian dairy and softwood lumber industries, and has also taken issue with Ottawa's solar panel exports and with the taxation of American tech firms.

US Trade Representative Katherine Tai has said she will defend American interests, starting with dairy farmers.

Her office has set up a dispute settlement panel under the USMCA to examine the issue of milk quotas imposed by Canada, much to its dismay.

Francois Dumontier, a spokesman for a group representing Quebec milk producers, said USMCA provides "no advantage."

He also called some provisions an "attack on Canadian sovereignty," because they restrict Canadian exports while allowing more imports from the United States.

After the pandemic

On the other side of the border, David Salmonsen, senior director of congressional relations with the American Farm Bureau Federation, pointed to a long list of trade disputes, but said he is overall optimistic.

"I think we'll get a better picture once everybody's economies are recovering from the pandemic," he said. "We supported the agreement, and we think it'll work to keep agricultural trade moving and growing between all three nations."

Ottawa however has called for its own dispute settlement panel over Washington's 18 percent tariffs on solar panels made in Canada.

Despite the skirmishes, Valeria Moy, general director of the Mexican Institute for Competitiveness, said that over the past year, there has been "no radical change compared to NAFTA."

However, she expects that USMCA could have an agreement on labor legislation in Mexico in the future.

Washington has already invoked USMCA twice to ask Mexico City to investigate violations of union rights in the automotive sector, notably at a General Motors plant.

"Will this have a beneficial effect on Mexican workers? It seems to me that it will," she said. "It will force Mexican companies to make changes."

But Moy warned that the United States could end up using the labor issue "as a pretext to apply protectionist measures."