A Trade Panel Backed Mexico and Canada in a Dispute With the U.S.

A trade panel backed Mexico and Canada in a dispute with the U.S. over rules to calculate regional content required for tariff-free automotive imports.

Mexico and Canada had challenged the U.S. method for calculating the regional content required under the USMCA trade pact for cars to have tariff-free access to the U.S., and requested the panel early last year after failing to reach agreement during consultations.

Canadian Trade Minister Mary Ng said the ruling reaffirms “our understanding of the negotiated outcome on the rules of origin for automotive products.”

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Canada joined Mexico’s initial complaint, warning the U.S. interpretation could inhibit the ability of domestic manufacturers from qualifying for duty-free trade in North America.

Canada “is glad to see that the dispute settlement mechanisms in place are supporting our rights and obligations negotiated” in the trade treaty, Ng added.

Next Step

The U.S. must use Mexico’s and Canada’s methods to calculate regional content, or face retaliatory tariffs.

In a statement, the U.S. Trade Representative’s office called the ruling “disappointing,” warning it could result in “less North American content in automobiles, less investment across the region and fewer American jobs.”

The USTR said it is considering its next move, adding it would discuss a possible resolution with Mexico and Canada. Mexico’s Economy Ministry said it would begin a dialogue with its trade partners on the ruling in the coming days.

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