In arguably the biggest test of the new NAFTA, Canada and Mexico have defeated the U.S. in a major dispute involving automobiles and calculating the origin of parts. It's seen as an early litmus test of the new trade pact.
Canada, Mexico and auto companies have been declared the winners in arguably the most important trade dispute under the new NAFTA, landing the U.S. on the losing side in a case about calculating the origin of auto parts.
The long-expected decision was known for weeks to the parties involved, yet it was withheld from public release until after North American leaders appeared together at a summit this week in Mexico.
It involves small print with big consequences for the industry at the heart of the continental trade agreement: Automobiles.
At its core, the dispute was about how hard to push car companies to use parts from North America, at a time when countries are seeking to pry back manufacturing jobs.
The specific case involved two conflicting methodologies for calculating the origins of a car's parts: One stricter, one easier.
Americans took a hard line. The U.S. wanted the toughest interpretation of the rules, which would force cars to include more North American parts to avoid a tariff.
Mexico fired off a suit against the U.S., calling its method damaging, costly to companies and counterproductive to the continent's car industry.
Canada joined the suit. Car companies eagerly supported the suit. And the complainants ultimately won.
automaker General Motors (GM) Brightdrop unit's CAMI EV Assembly, Canada's first full-scale electric vehicle manufacturing plant, in Ingersoll, Ontario, Canada December 5, 2022. REUTERS/Carlos Osorio" width="" />
Canada, Mexico and the auto industry are now celebrating the ruling from a five-member international panel.
In a decision declared Dec. 14, but only released Wednesday, the panel said that the United States breached the new Canada-U.S.-Mexico agreement (CUSMA) when it tried imposing new rules.
The ruling pointed to a piece of evidence submitted by Canada: an email sent by a U.S. official that supported the complainants' claim that all three countries originally understood they were agreeing to the simpler formula.
"Today's decision is a good decision for the industry," International Trade Minister Mary Ng told reporters in Mexico City. "It's what we negotiated.… Clarity in the rules — it's what today's decision provides."
It's the second win for Canada under the new trade agreement; Canada also won a case on solar panels, though it was the main loser in a dairy dispute with the U.S.
