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USMCA’s July Roll Out Draws Mostly Praise, But Some Question Timing

U.S. Trade Representative (USTR) Robert Lighthizer notified Congress this week that Canada and Mexico have taken the necessary measures to comply with their commitments under the United States-Mexico-Canada Agreement (USMCA), and that the agreement will enter into force on July 1.

Most executives and industry groups agreed with the implementation setting, but some believe this isn’t the right time, given the coronavirus pandemic and its supply chain impacts.

Following the notification to Congress, the United States became the third country to notify the other parties that it had completed its domestic procedures to implement the agreement, which is the final step necessary for the USMCA to enter into force.

USTR said this marks the beginning of a “historic new chapter for North American trade by supporting more balanced, reciprocal trade, leading to freer markets, fairer trade and robust economic growth in North America.” The agreement, it added, significantly improves and modernizes approaches to “rules of origin, agricultural market access, intellectual property, digital trade, financial services, labor and numerous other sectors.”

These enhancements will deliver more jobs, provide stronger labor protections, and expand market access, creating new opportunities for American workers, farmers and ranchers, USTR said.

“The crisis and recovery from the COVID-19 pandemic demonstrates that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America,” Lighthizer said. “The USMCA’s entry into force is a landmark achievement in that effort.”

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The National Council of Textile Organizations (NCTO) stressed the critical importance of moving ahead with the USMCA and lauded Lighthizer for setting July 1 as the implementation date now that the U.S. has taken the necessary final procedural steps.

“We commend Ambassador Lighthizer for moving forward with USMCA, a critical trade deal that will greatly benefit the U.S. textile industry at a time when domestic producers, facing significant challenges due to the impact of the COVID-19 pandemic, have mobilized to convert their production lines to manufacturing personal protective equipment (PPE) for frontline workers during this crisis,” NCTO president and CEO Kim Glas said.

“Sustaining the $20 billion in apparel and textile trilateral trade between the U.S., Mexico and Canada is absolutely critical at this time,” Glas added. “USMCA, which makes several key improvements over the former North American Free Trade Agreement (NAFTA) will go a long way to increasing the textile industry’s exports, as well as investments and capacity in the U.S. We need to maintain and expand a Western Hemisphere supply chain to meet national emergencies head on in the future.”

Mexico and Canada are the two largest export markets for the U.S. textile and apparel industry, totaling nearly $11.3 billion last year.

Greenwood Mills president and CEO Jay Self hailed USMCA as “vitally important.”

The agreement, he said, “provides this hemisphere with production capabilities to counter Asia and other developing areas.” Plus, USMCA enables “speed to market and that is such a critical factor not only for our traditional fabric business, but also for our production of face masks and gowns for frontline workers battling the coronavirus,” Self said. “Anything we do to make this hemisphere more competitive is to our advantage.”

Greenwood Mills, a family-owned textile company in Greenwood, S.C., has converted its denim jeans production at a factory in Mexico to PPE production of non-medical face masks and hospital gowns.

“USMCA creates more certainty in the Western Hemisphere and allows us to have a vision of how to continue to build the domestic textile platform and supply chain, while giving us the confidence to re-invest,” said Cameron Hamrick, president of Hamrick Mills, a 119-year-old company based in Gaffney, S.C., and producer of greige woven fabrics that has also pivoted to PPE production to help frontline workers. “This trade agreement makes several improvements, and our hope is it will spur more investment in the Western Hemisphere. Now is the time more than ever to have a strong regional supply chain in the Western Hemisphere.”

According to James W. McKinnon, CEO of Cotswold Industries, “Localized cooperation up and down the supply chain is of paramount importance to securing our economy in a predictable manner and as a model for increased investment for all stakeholders.”

The USMCA’s implementation “is critical to the continued health and growth of the U.S. textile industry and our regional manufacturing partners,” said McKinnon, whose company is a vertically integrated textile engineering and marketing company that manufactures and distributes technical barriers, knitted and woven industrial fabrics and non-woven substrates, many of which the company has utilized for the production of PPE products. “It’s times like this that highlight the importance of a robust regional manufacturing base in the Western Hemisphere.”

The American Apparel & Footwear Association (AAFA) similarly came out in favor of the USCMA entering into force.

“Once the USMCA is up and running, it will help provide sorely needed predictability to a key trade partnership that supports hundreds of thousands of textile, apparel, and footwear, jobs in the U.S. and in North America,” AAFA president and CEO Steve Lamar said. “We look forward to working with the administration and our partners in Mexico and Canada to make sure there is a seamless transition from the NAFTA.”

Not all agree with that sentiment, however, feeling the trade community has enough to worry about right now.

“While we appreciate that the administration wants to get the USMCA in effect as soon as possible, we are worried that the July 1 date may be a little rushed,” said Julia Hughes, president of the Unites States fashion Industry Association. “Of course, the COVID-19 crisis has been having an impact on the ability of companies to manage their supply chain, and at many companies key customs and compliance experts are on furlough, leaving less time than usual to make changes to sourcing.”

Hughes said this concern was heightened after the Customs Operations Advisory Committee (COAC) made a recommendation earlier this month asking for a delay in implementation until Jan. 1.

“If the customs brokers, freight forwarders, shipping lines, express companies and all the supply chain experts who serve on the COAC are concerned about implementation, then we have to take it seriously,” she added.