Deputy Under Secretary, Performing the Non-Exclusive Functions and Duties of the Under Secretary for International Trade Joseph Semsar Remarks June 30, 2020
Remarks at the Wilson Center’s
USMCA: Launching a New Phase of Prosperity in North America Webcast Event
June 30, 2020
As Prepared For Delivery
Thank you, Ambassador Wayne, for the introduction.
We are incredibly grateful to the Wilson Center for hosting this webinar.
Today, we gather to mark a very important occasion in North American trade relations – the entry into force of the U.S.-Mexico-Canada Agreement, or U-S-M-C-A.
I am honored for the opportunity to gather with my distinguished counterparts, Mexico’s Under Secretary for Foreign Trade Luz Mariá de la Mora and Canada’s Chief Trade Commissioner Dr. Ailish Campbell.
And I am very pleased to be able to share with you all the benefits that USMCA will bring to our respective countries, with a particular focus on its positive impacts on the automotive industry and on small- and medium-sized enterprises.
The U.S. Department of Commerce plays a crucial role in connecting U.S. companies to international business opportunities through free trade agreements like USMCA.
The Commerce Department also plays a role in educating the business community about how trade agreements facilitate the export of U.S. goods and services.
As Deputy Under Secretary of Commerce for International Trade, performing the non-exclusive functions and duties of the Under Secretary for International Trade, I have the privilege of leading the International Trade Administration, with a staff of over 1,900 trade and investment professionals around the world.
Our mission at ITA is to strengthen the competitiveness of U.S. industry, promote trade and investment, and ensure fair trade through the rigorous enforcement of our trade laws and agreements.
ITA works to improve the global business environment and helps U.S. organizations compete at home and abroad, especially through the work of the U.S. Commercial Service.
ITA has a presence in over 75 markets around the world, including exemplary teams of commercial officers and staff in cities throughout Canada and Mexico, as well as nearly 100 offices throughout the U.S.
Their job is to help companies export, and I encourage those of you engaged in exporting, or seeking to export, to connect with them.
From the outset of his Administration, and even while a candidate, President Donald Trump promised to modernize and rebalance the North American trade relationship.
Along with our partners in Mexico and Canada, we are proud to say we have done just that.
These goals for North America are a key part of a broader trade agenda, the goal of which is to pursue free, fair and reciprocal trade with all our trading partners.
Throughout the negotiations, the Trump Administration was guided by these principles, and the ultimate goal of robust economic growth in North America.
The USMCA will ensure North America remains the world’s economic powerhouse – the Agreement will create high-paying jobs for Americans, Canadians, and Mexicans, and grow the North American economy.
Indeed, USMCA will have ramifications far beyond North America in that it sets a new, higher benchmark and template for future U.S. trade agreements.
The provisions contained in USMCA will be the starting point for new trade deals with countries in Asia, Africa, Europe, and elsewhere.
So, although USMCA primarily addresses North American trade, in a broader sense, it is about building a freer, fairer, and more reciprocal global trade and investment system.
The United States and Canada started on their path towards integration of our automotive industries with the 1965 Auto Pact. This integration was improved with the adoption of the U.S.-Canada Free Trade Agreement in 1989 and expanded again with the passage of NAFTA, which added Mexico.
The USMCA modernizes critical provisions of NAFTA and sets the stage for creating the automotive industry of the future in North America.
Specific to the automotive industry, the USMCA has updated automotive rules of origin, which will encourage manufacturing in the United States and create regional economic growth by requiring that 75 percent of passenger vehicle and light truck content be produced in North America, and that key core parts also be originating in North America.
The Agreement also encourages higher manufacturing wages by requiring 40 to 45 percent of the value of passenger cars and light trucks be made by workers earning an average base-wage of at least $16 per hour.
As a part of this calculation, manufacturers can earn credit for investments in research and development, incentivizing the location of this critical activity in North America.
Given the strength of North American automakers in the field of R&D, we expect the USMCA to support their continuation as leading global innovators.
This labor provision will support better jobs for North American workers, and incentivize billions of dollars in additional U.S. vehicle and auto parts production.
In addition, originating passenger vehicles and light and heavy truck producers must certify that 70 percent of the steel and aluminum purchases come from North America.
The International Trade Commission has concluded that USMCA will have a positive economic effect and will increase U.S. GDP by $68.2 billion and domestic employment by 176,000 jobs.
According to estimates from the Office of the U.S. Trade Representative new capital investments in the U.S. attributable to USMCA by automakers and battery suppliers will total approximately $34 billion over five years. The USMCA will incentivize at least $23 billion annually in new U.S. automotive parts purchases within five years.
Investments and additional U.S. automotive parts purchases attributable to the USMCA will support approximately 76,000 additional jobs in the U.S. automotive sector over a five-year period.
Specifically, the USMCA will incentivize the production of advanced technology vehicles, and high-technology auto parts in the United States by:
One, eliminating a loophole that disincentivized development and production of advanced technology components in the United States.
For too long, under the NAFTA rules, new technologies have been “deemed” originating even if they’re produced outside of the United States. The USMCA rules of origin require these parts be produced in the region, which will ensure the development of new North American supply chains for high-technology electronic components and high-value parts for use in advanced technology vehicles.
Two, requiring advanced batteries – including battery cells – to be originating. This should incentivize new investments in advanced battery production facilities in high-wage North American facilities to enable auto producers to the meet the new requirements.
Three, incentivizing local production of high-value autonomous vehicle sensing platforms and computing platforms through the USMCA Regional Value Content requirements.
All three of these provisions will support additional high-paying jobs in our automotive sector of the future and encourage automakers and suppliers to locate production of new energy and autonomous vehicles in North America.
The United States conducts more than $1.3 trillion in annual trade with Canada and Mexico, and U.S. exports to both markets are estimated to support close to 3 million U.S. jobs.
This trade relationship has an outsized impact on U.S SMEs, for which Mexico and Canada are the two largest export markets. In fact, 94 percent of U.S. firms that export goods to Canada and Mexico are SMEs. Specifically, the value of exports by SMEs to Canada alone account for more than a quarter of all U.S. exports, and they account for more than one-third of value of all U.S. exports to Mexico.
SMEs make up roughly 90% of the 35,000-PLUS companies ITA typically serves each year, so the impact on those with whom we work most closely is enormously positive. Which is why we are delighted to highlight that, for the first time ever in a U.S. free trade agreement, the USMCA includes a stand-alone chapter on SMEs.
In the SME Chapter, the USMCA promotes cooperation among our countries to increase SME trade and investment opportunities. It establishes information-sharing tools that will help SMEs better understand the benefits of the agreement and provides other information useful for SMEs doing business in the region.
The chapter also establishes a committee on SME issues comprising government officials from each country.
This will include an ongoing SME Dialogue, which will be open to participation by SMEs, including those owned by diverse and under-represented groups. The Dialogue will enable participants to provide views and information to government officials on the implementation and further modernization of the agreement, thereby ensuring that SMEs continue to benefit.
Key provisions elsewhere in the agreement that are particularly beneficial to small businesses include:
An expanded Intellectual Property Rights Chapter. The USMCA includes the most comprehensive enforcement provisions of any U.S. trade agreement, including not just patents, copyright, and trademarks, but also broad protection of trade secret theft, and civil and criminal penalties for satellite and cable theft.
Another is the USMCA Customs and Trade Facilitation Chapter, which goes beyond any past trade agreement to help reduce costs and bring greater predictability to cross-border transactions. Canada and Mexico will be required to publish information on import, export, and transit requirements, and related fees, charges, and penalties on the Internet.
The USMCA also raises the customs de minimis levels for duty and tax-free express shipments to Mexico and Canada.
Additionally, the Customs and Trade Facilitation Chapter includes specific provisions, including:
A threshold of less than $2,500 for Parties to apply fewer customs formalities than those applied under formal entry procedures, expedited release of express shipments; and an expanded scope of advanced rulings by Customs authorities and online searchable database for the trade community;
All of this will allow SMEs and their customs brokers, if used, to better predict trade-related costs and requirements before they export.
Small businesses should consult the ITA website, trade.gov, for important information about preparing their businesses to take advantage of the provisions in the USMCA.
While Dr. Campbell will expand on the USMCA’s digital trade chapter, I would simply like to note that it is a key component, and perhaps the best indicator, of the modernization that we felt necessary.
When the original NAFTA was signed 25 years ago, we were using floppy disks, the smartphones we carry today would have been considered supercomputers, and the internet hadn’t even been widely adopted. USMCA provides important updates and new chapters that reflect a modern agreement.
To reflect the enormous amount of data that now flows across our respective borders, including from our handheld “super computers,” the all-new chapter contains the strongest disciplines on digital trade of any international agreement, providing a firm foundation for the expansion of trade and investment in the innovative products and services
The chapter addresses many of the digital trade barriers that digital services companies and businesses across the economy have encountered doing business overseas.
As I close, I simply wish to convey that we in North America must continue to work together to adopt and implement policies that promote competitiveness, create jobs, and encourage investment.
USMCA is a great step towards this objective, which is why we are so very pleased to gather today – virtually, of course – to celebrate this milestone in our trade relationship.
We all have a stake in making North America more competitive, more vibrant and more prosperous, and the U.S. Department of Commerce is a willing and committed partner to this success.