The United States has officially set its negotiating position ahead of next summer’s review of the United States-Mexico-Canada Agreement: secure changes to the deal before agreeing to any extension.
“The USMCA has been successful to a degree,” U.S. Trade Representative Jamieson Greer told Congress last week, while reporting on the country’s negotiating position. In speaking to its success, he said the free trade deal maintains broad support and cited a 56% increase in U.S. exports to Canada and Mexico and a near doubling of pay for workers in Mexico since 2020.
However, he also detailed a litany of shortcomings in the deal — including on key supply chain topics like tariffs, rules of origin and critical minerals — and said the U.S. has plans to address them during the joint review.
“USTR’s view is that, whatever the USMCA’s value to the United States and even North America, the shortcomings are such that a rubberstamp of the Agreement is not in the national interest,” Greer said in testimony to both the House Ways and Means Committee and the Senate Finance Committee.
In October, the Office of the USTR began the consultation process for the mandated six-year joint review of the pact. As part of preparations for the joint review process, which will take place next July, the USTR opened a 45-day public comment period and held three days of hearings in December.
During the hearings, numerous trade organizations, including the Retail Industry Leaders Association and the Consumer Brands Association, pushed for renewal of the deal while requesting certain adjustments. Examples included simplifying rules of origin paperwork and expanding the list of goods that qualify for duty-free treatment under the USMCA.
“In their comments, many stakeholders expressed support for the USMCA and many explicitly called for the Agreement to be extended,” Greer said. “However, at the same time, virtually all stakeholders also called for some sort of improvement to the Agreement.”
Here are five key issues the U.S. will focus on during the joint review process that supply chain managers should keep an eye on.
1. Strengthening rules of origin and combating offshoring
Greer said that improving rules of origin for non-automotive goods and enhancing penalties for offshoring U.S. production to Mexico or Canada were top priorities the U.S. plans to address.
“Although trade within North America is more conducive to bolstering national security relative to trading with other parts of the world, our large trade deficit reflects offshoring and structural disadvantages,” Greer said.
He further added that the USMCA’s original design does not address investments made in the region from companies based in other countries “or the effects of industrial overcapacity on the three economies.”
2. Ensuring alignment on tariffs, export controls, customs procedures
Mexico and Canada were two of the first countries targeted under the Trump administration’s sweeping tariff blitz this year. However, USMCA protections have provided a shield for many goods imported into the U.S. from the two nations.
Greer acknowledged public support for the continuation of duty-free trade under the agreement. He said the U.S. would prioritize “enhancing economic security alignment on tariffs, export controls, and investment screening” while addressing customs restrictions and complications for U.S. exporters crossing into either country.
Additionally, Greer highlighted actions by both countries to achieve these ends, such as Mexico’s plan to tariff over 1,400 products from non-free trade agreement partner countries, including China.
“In addition, we have succeeded in pushing Canada to remove its retaliatory tariffs on over $20 billion in U.S. exports to Canada,” Greer said.
3. Improving market access and protections for U.S. food producers
Food producers were heavily represented during the USTR’s public hearings earlier this month, with groups such as the Fresh Produce Association of the Americas and the U.S. Dairy Export Council outlining industry-specific revisions they would like to see in a renewed USMCA.
For example, Shawna Morris, EVP of trade policy and global affairs for the National Milk Producers Federation and the U.S. Dairy Export Council, urged the USTR to address “Canada’s growing artificially low-priced dairy protein exports and its blatant attempts to circumvent USMCA’s previous efforts to limit this process.”
Greer acknowledged several food supply chain issues in his discussion of U.S. priorities for the USMCA review. The U.S. will seek to address Canada’s provincial bans on distribution of U.S. alcohol products and its dairy exports, as well as Mexico’s protections for European Union meat and cheese and the impact of Mexico’s seasonal produce exports on U.S. growers, among other topics.
4. Boosting critical mineral production
The U.S. plans to develop a critical minerals marketplace as part of the USMCA review, per Greer.
The marketplace would aim to encourage mining, processing, recycling, reuse and manufacturing of critical minerals among the three countries. Greer did not provide further details on how the U.S. expects such an initiative to be implemented or operated.
The marketplace idea would build on the Trump administration’s ongoing efforts to strengthen the domestic critical mineral supply, and acknowledges a focus on critical minerals urged by groups such as the Climate Leadership Council during the USMCA consultation hearings earlier this month.
5. Enhancing labor and environmental protections
The USMCA established several provisions related to labor and environmental protections, including the Rapid Response Mechanism, which allows each of the three countries to petition for review of worker rights and conditions at specific facilities within the other nations.
Greer said the U.S. aims to expand on these efforts by improving implementation of forced labor import bans across all three countries. In addition, the U.S. will push Mexico to allow sanction authority to the Federal Center for Conciliation and Labor Registration.
On the environmental front, Greer was less expansive but did note plans to push for environmental law enforcement improvements in Mexico, specifically citing fisheries management, fishing practices and wildlife trade.