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**JANUARY 18, 2023**
Kuttner on TAP
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**** When Global Trade
Bureaucrats Earn Our Contempt
A panel ruling undermines the USMCA agreement on North American content.
Biden should ignore it.
The U.S.-Mexico-Canada Agreement (USMCA) was a deal between
congressional Democrats and the Trump administration to improve the old
NAFTA in multiple respects. The goal was to ensure that more jobs would
actually be created in the U.S.
The USMCA required wage rates of at least $16 an hour for auto
production to qualify as North American content and added a provision
requiring that 70 percent of the steel and aluminum used in such
production be North American. But last week, a USMCA dispute resolution
panel ruled in favor of a complaint
<[link removed]>
brought by Canada and Mexico that will actually help China. The ruling
weakens the USMCA's rules of origin for autos and parts.
The goal of the complaint that led to the ruling was to help Canada and
Mexico, but the result would allow more production in China to count as
North American for purposes of receiving favorable tariff treatment.
This, of course, defeats the broader purpose of the USMCA.
Under the USMCA, 75 percent of a vehicle's overall components must
originate in North America to get tax-free status. Canada and Mexico
challenged how that content is calculated. The panel agreed to a looser
definition-which will benefit exports from China.
Adam Hodge, a spokesman for the U.S. trade representative (USTR), issued
a statement <[link removed]>
saying, "The disappointing USMCA panel interpretation could result in
less North American content in automobiles, less investment across the
region, and fewer jobs." He added that the Biden administration was
reviewing its options.
In its submission to the panel
<[link removed]>
challenging the demands of Canada and Mexico, the USTR had warned that
the changes in the formula requested by the two governments could reduce
North American content by as much as 33 percent, costing several
billions of dollars in production and jobs.
Under the USMCA, the United States must now abide by the panel decision,
or face possible retaliatory tariffs. But can you imagine Canada or
Mexico, both of which depend heavily on the U.S. market, imposing
retaliatory tariffs on the U.S.? I can't.
Michael Stumo, who heads the Coalition for a Prosperous America, calls
the ruling a windfall for China
<[link removed]>
and urges the Biden administration to disregard the panel ruling and
continue the existing content rules.
This is another case, like that of the World Trade Organization, where
global trade bureaucrats impose decisions that are contradictory in
their own terms and undermine the U.S. national interest. Biden, in
devising a long-overdue industrial policy, has decided to ignore the
WTO. The USMCA panel has earned the same treatment.
~ ROBERT KUTTNER
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Lefties Amok: California's Upcoming Senate Race
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Four Democratic House members draw a bead on the seat Feinstein will
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Anti-Monopoly Reformer Joins Department of Transportation
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Jen Howard, former chief of staff to Lina Khan at the FTC, is the new
chief competition officer at DOT. BY DAVID DAYEN
The Unfair Costs of Care
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A very different kind of inflation BY NANCY FOLBRE
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