Trio of nations reach new deal to replace NAFTA

Trio of nations reach new deal to replace NAFTA

Industry associations provide their statements on the new United States-Mexico-Canada Agreement (USMCA).

October 1, 2018

The United States, Canada and Mexico reached an agreement late on Sunday, Sept. 30, to update the North American Free Trade Agreement (NAFTA). NAFTA was first enacted in 1994 as a way to govern more than $1.2 trillion worth of trade among the U.S., Canada and Mexico. The Trump administration had been working to renegotiate NAFTA with the governments of Canada and Mexico. 

As a result of the agreement, the new deal will be known as the United States-Mexico-Canada Agreement (USMCA), according to a news report in the Washington Post. Most of the key provisions of the deal won’t go into effect until 2020 since leaders from all three countries have to sign it and then Congress and legislatures in Canada and Mexico have to approve it, the Washington Post reports. 

A number of industry associations have responded so far to share what this new USMCA deal means for the recycling industry. 

Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI), Washington, offered his statement in reaction to the announcement of USMCA. 

“We appreciate the administration’s hard work to reach this trade agreement between the U.S., Canada and Mexico—especially regarding measures that ensure North American steel continues to be used in automobile production,” Gibson says. “We are pleased that the agreement is trilateral, as the relationship between our three countries has been extremely beneficial for the steel industry and resulted in robust trade and investment in the region over the past 25 years. This new agreement is significant, as it will keep our manufacturing supply chains strong throughout North America.”

CANACERO, a Mexico-based association representing that nation’s steelmakers, posted a statement online Oct. 2 that decried the fact the new agreement did nothing to replace existing tariffs on steel imposed by the U.S. government, referring to “the serious situation that affects our industrial sector created by the application of tariffs of 25 percent under Section 232 imposed by the U.S.”

Adds the group, “Mexico does not represent any risk of national security for the U.S., and such an artificial measure is frankly inconsistent with the principles of free trade and is a damaging precedent that violates the free market of the region.”

Regarding customs clearances, the Institute of Scrap Recycling Industries (ISRI), Washington, says it is hopeful the USMCA’s more detailed guidelines for the three governments to cooperate will allow for improved border crossings, including information sharing, law enforcement collaboration, procedures for adjudicating disputes. ISRI says the USMCA enhances collaboration between the government to prevent illegal transshipment by outside parties.

ISRI adds that USMCA does not mention specific standards or standards bodies as preferred guidelines, so the association is “hopeful that ISRI Specifications will be acknowledged as the guidelines for scrap.” 

In USMCA’s Rules of Origin, ISRI notes that waste and scrap “maintain the same origin classification as in the NAFTA in that scrap materials are considered ‘originating’ in North America if processed in one of three countries … as well as derived from used goods collected in one of the three countries for purposes of extracting raw materials.” The association says this aspect of USMCA is beneficial for manufacturing customers that produce goods from scrap commodities processed in North America, since they will be able to include scrap as part of the new 60 percent transaction value (or 50 percent of cost) accumulation threshold for duty-free trade within North America.

Referring to the U.S. 232 tariffs on steel and aluminum from Canada and Mexico, ISRI says reports indicate that those negotiations “will happen separately, but no timeline was given.”

Additionally, the Aluminum Association released a statement expressing its disappointment that the latest agreement didn't include a Section 232 tariff resolution.

“The Aluminum Association is disappointed that the Section 232 aluminum tariffs were not addressed as a part of the United States-Mexico-Canada Agreement (USMCA),” says Heidi Brock, president and CEO of the association. “Now is the time for the United States to work with Canada and Mexico to provide a full exemption—without quotas—for aluminum imports from those countries. This should occur as soon as possible, and certainly before the final agreement is signed.”

Brock adds that integrated North American supply chains are a main reason the aluminum industry has been able to meet growing demand every year. However, she says, as the industry is in a deficit market, additional barriers in the supply chain such as the tariffs will threaten growth.

“The current Section 232 tariffs are hurting U.S. aluminum companies, making them less competitive on the world stage,” Brock says. “Fully 97 percent of domestic aluminum industry jobs are in mid- and downstream production and processing. By artificially raising input prices and constraining metal supply, tariffs and quotas risk harming demand, growth and investment in the United States. We will continue to review the specifics of the agreement and work towards tariff- and quota-free trade of aluminum with our North American trading partners.”