By Senator Claudia Ruiz Massieu
September 2021 marks 14 months since the United States-Mexico-Canada Agreement (USMCA), the high-standard instrument that laid the foundations for North American economic integration in the twenty-first century, was enacted. Are we talking about a successful year for the USMCA? The answer should be a convincing yes, since the trade agreement has been implemented under quite particular and unprecedented circumstances due to COVID-19, but it worked well nevertheless!
The implementation effort coincided with the pandemic, which resulted in the worst economic crisis since the Great Depression, causing high unemployment rates, travel restrictions and closed land borders within North America, just to mention a few challenges. Nevertheless, regional integration (inaugurated with NAFTA and boosted by the USMCA) has been an essential tool to relieve the economic impact of the health crisis in our countries, accelerating the recovery of the three national economies. For example, in the first half of 2021, trade between Mexico and the U.S. reached new all-time highs: bilateral exchanges amounted to $320 billion, a 31.6 percent increase compared to the same period in 2020, and near four percent more than in 2019, before COVID-19.
In light of these times, perhaps the main challenge for the USMCA implementation in the short term, is to ensure that the agreement works as well under normal circumstances as it has been working in the middle of a global crisis… But which factors were the keys to success during USMCA’s first year? In my opinion, there have been three: cooperation, coordination, and collaboration.
Cooperation between Mexico and the United States to accelerate vaccinations in border cities so travel restrictions could end as soon as possible has been essential. Coordination between the U.S., Mexico, and Canada during the first COVID-19 lockdown, such as setting common standards to determine essential activities on both sides of the borders to guarantee operation of regional supply chains for strategic industries. Also, there was collaboration between the public and private sectors of the three countries to address potential issues within the trade agreement such as the transitional regimen for the new rules of origin in the automotive industry. These examples demonstrate the benefits of working together and facing shared challenges with shared responsibility.
However, the USMCA implementation has not been without disputes and, in coming years, unilateral decisions are sure to be a huge challenge for USMCA member-countries. In the United States, for instance, the 2020 electoral process opened the door for renewed pressure to establish trade barriers for Mexican agricultural products, barriers which would benefit states like Georgia and Florida. The Trump administration backed the Republican legislators in those states and decided to investigate the importation of various products, of which Mexico is one of the main suppliers.
In Mexico, on the other hand, the congressional majority has passed presidential bills to limit the access of foreign investors in the hydrocarbon and electricity markets in order to favor energy state-owned companies. The Mexican Supreme Court will review whether these regulations are constitutional, but regardless of its resolution, the reforms have already been the subject of controversy within the USMCA which fully protects U.S. and Canadian investments in Mexico. These decisions only raise problems and slow down solutions.
The lesson is clear: there is no room for unilateralism. Beyond its immediate effects, unilateralism undermines mutual trust between partners. On the contrary, only dialogue, consensus building and cooperation to identify and address common issues can draw a safe roadmap for a durable and strengthened integration between our countries.
Successful USMCA implementation entails the transformation and update of a complex framework of laws, regulations, public policies, practices, and even cultural mindsets. It therefore demands permanent coordination between all sectors of the North American economy: public, private, and social sectors, as well as society at large. If we really want to make the USMCA a lever for inclusive growth and competitive development in the region, we need to avoid the temptation to gain any advantage outside the common rules. The success of the USMCA, regardless of circumstances, depends exclusively on us.
“Nevertheless, regional integration has been an essential tool to relieve the economic impact of the health crisis in our countries, accelerating the recovery of the three national economies” Senator Claudia Ruiz Massieu chairs the Special Committee for the USMCA Implementation in the Mexican Senate.
