U.S.-Mexico trade deal welcomed - but industry players want details

The automotive industry in Canada is broadly supportive of the trade agreement struck between Mexico and the United States Monday, describing the move as progress towards a redesigned NAFTA. But Canada's textile industry wasn't quite as welcoming.

Auto industry says Monday's announcement shows progress - but questions raised about textiles

U.S. Trade Representative Robert Lighthizer, left, and Mexican Secretary of Economy Idelfonso Guajardo, right, walk into the White House on Monday before the announcement of a U.S.-Mexico trade deal. (Luis Alonso Lugo/Associated Press)

While the trade deal U.S. President Donald Trump's administration struck with Mexico has the potential to set the stage for the final phase of NAFTA negotiations, many of the details have yet to be fully revealed, leaving industry players cautious in their reaction to the news.

For some, there are visible potential benefits, while for others the uncertainty and lack of detail have raised concerns that their industry may still be under threat.

The automobile industry in Canada, for instance, appears to be broadly supportive of the deal, calling it progress toward a new North American Free Trade Agreement. 

"I think it's a good start. Ultimately one of the biggest problems, of course, was the low wages in Mexico and so this is, I think, a positive start," said Jerry Dias, the head of Unifor, Canada's largest private sector union, which includes auto workers.

The deal, as announced, would require 40-45 per cent of auto content made in Mexico to be made by workers earning at least $16 US per hour, placating unions in Canada and the U.S. concerned about high-paying jobs moving to Mexico's low-wage economy

"I also see the increase of the rules of origin to 75 per cent as a positive first step, we proposed that," Dias said, suggesting increasing the threshold could prompt more automotive parts to be made in Canada, benefiting workers here.

The revised U.S.-Mexico deal will require 75 per cent of auto content to be made in North America, up from 62.5 per cent under the current NAFTA deal.

But Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association, said that despite the increase to the rules of origin threshold, some companies may simply continue to buy parts from abroad and just eat the 2.5 per cent tariff. Still, he called the deal "progress."

The Canadian Automobile Dealers Association also welcomed the news of the deal and said in a statement that all parties should now work toward "a final trilateral agreement as soon as possible." 

The textile industry

The textile industry, however, said it has concerns with what it has heard about the deal so far, specifically the potential that sewing thread, pocket fabric, elastic bands and coated fabric would also have to meet North American rules of origin.

According to the Canadian Apparel Federation, at present, if yarn used to make a textile was made in North America, the textile that yarn was turned into was made in North America and the finished article of clothing itself was made in North America, then the garment could be sold into the U.S. and Mexico tariff free. 

But under this new agreement, the industry fears that other components, including thread, the linings of pockets and elastic bands sewn into the garments, will also have to be made in North America for the garment to escape tariffs.

"They are putting all sorts of extra requirements, requirements that are just extraordinary," said Bob Kirke, executive director of the Canadian Apparel Federation. "It's ridiculous, it's going to disqualify the only sewing thread supplier in Canada, and I am not in favour of that."

"NAFTA wasn't broken and now they are fixing it, and they are fixing it in a way that will break it, or at least make it harder to trade," Kirke said.

The president of Cansew, a Canadian sewing thread supplier whose products are made both here and abroad, said the announcement has left his industry on uncertain ground.

"We know it is a concern but we do not know what the outcome will be. We have expressed our misgivings to the association but where it will end up we don't know," said Hershie Schachter.

Fruit and vegetables

Ron Bonnett, president of the Canadian Federation of Agriculture, said noted that other issues, such as dispute settlement, remain unresolved.

He said while the announcement of U.S.-Mexico deal may make a splash, he is still waiting to see what it will mean for agriculture in Canada.

The Canadian Produce Marketing Association, however, said it was encouraged by the agreement and by outgoing Mexican President Enrique Peña Nieto's reference to including Canada in future discussions. 

"It is our understanding that the seasonality provision has been removed from the U.S.-Mexico agreement and will not be part of the discussions moving forward,"  the CPMA said in a statement. "The CPMA has long advocated for the removal of the seasonality provision and is pleased that it will not be a feature of a future trilateral agreement."

That provision would have allowed U.S. growers to request an anti-dumping investigation against Mexican producers based on only one season's worth of data, rather than looking at the total shipments of produce over longer time frames.