“USMCA’s dispute settlement mechanisms ensure U.S. exporters, innovators, investors, farmers, and ranchers enjoy the benefit of the bargain we negotiated,” Republican Leader of the Trade Subcommittee Rep. Adrian Smith (R-NE) said in opening remarks in a Ways and Means Republican Meeting titled “Enforce USMCA to Make Trade Work for All Americans.”
Rep. Smith underscored the importance of enforcing all aspects of the bipartisan United-States-Mexico-Canada Agreement (USMCA) to advocate for American goods, particularly citing Canadian dairy and Mexican corn and energy policies as areas of concern.
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- “USMCA includes some of the most innovative trade commitments the United States has ever negotiated in agriculture and digital trade, as well as robust obligations to promote intellectual property protection, competition with state-owned enterprises, and labor and environment standards.”
- “These trade agreements are not worth the paper they are written on if they are not enforced, and enforcement is our focus today. When utilized, USMCA’s dispute settlement mechanisms ensure U.S. exporters, innovators, investors, farmers, and ranchers enjoy the benefit of the bargain we negotiated.”
- “These tools are useless unless the Biden Administration deploys them to enforce ALL aspects of the Agreement—not just its priorities of labor and the environment.”
Rep. Smith’s full remarks as prepared for delivery appear below.
The United States-Mexico-Canada Agreement – or USMCA – entered into force almost two years ago. In modernizing NAFTA, USMCA includes some of the most innovative trade commitments the United States has ever negotiated in agriculture and digital trade, as well as robust obligations to promote intellectual property protection, competition with state-owned enterprises, and labor and environment standards.
USMCA was also the product of bipartisan collaboration on trade. Across both chambers we had 474 ayes for the agreement. Not since Congress voted in favor of the U.S.-Jordan FTA in 2001 has a free trade agreement secured as much bipartisan support in both chambers.
However, these trade agreements are not worth the paper they are written on if they are not enforced, and enforcement is our focus today. When utilized, USMCA’s dispute settlement mechanisms ensure U.S. exporters, innovators, investors, farmers, and ranchers enjoy the benefit of the bargain we negotiated. But these tools are useless unless the Biden Administration deploys them to enforce ALL aspects of the Agreement—not just its priorities of labor and the environment.
Republican Ways and Means Members are concerned U.S. farmers and ranchers are not enjoying the full benefit of the bargain we negotiated in agriculture.
In USMCA, Canada agreed to eliminate a program allowing low-priced Canadian dairy ingredients to undersell our American dairy products in Canada and third-country markets. If adhered to, this change would provide new export opportunities for U.S. dairy farmers. Soon after USMCA entered into force, the Trump Administration determined Canada was not honoring this commitment and requested enforcement consultations.
The Biden Administration took up the cause, and in January, a USMCA dispute settlement panel ruled in favor of the United States. At this stage, full compliance by Canada is long overdue.
Mexico also has a long history of being a critical agricultural export market for the US and is the largest export market for U.S. corn products. Under USMCA, for the first time, the United States, Mexico, and Canada agreed to provisions enhancing cooperation on agriculture biotech trade-related matters. The USMCA parties also agreed to strengthen disciplines for science-based sanitary and phytosanitary measures.
I remain concerned that Mexico is not honoring these commitments with respect to imports of glyphosate and genetically modified corn. I am also concerned Mexico is not processing ag biotech approval applications on a regular basis, as the Agreement requires.
On energy, Republican Ways and Means Members have grave concerns about President López Obrador’s efforts to renationalize Mexico’s oil and gas and electricity sectors.
In 2013, the Mexican Government undertook a series of Constitutional reforms to signal Mexico’s electricity and hydrocarbons sectors were open for private investment, and U.S. and other foreign investors have responded with major, highly beneficial, investments to Mexico. In USMCA, we negotiated numerous commitments across dozens of chapters to lock in those reforms. However, as the ink was drying on the Agreement, President López Obrador began to unwind them.
President López Obrador has since directed Mexican regulators to use all available resources to preference Mexico’s state-owned petroleum and utility companies, to the detriment of U.S. energy-sector operators. These actions violate the letter and the spirit of USMCA’s innovative chapter on State-Owned Enterprises, or SOEs.
I am also concerned that President Obrador’s preference of SOEs in the energy sector implicates numerous other obligations in the agreement.
For example, the Mexican Tax Administrative Service drastically limited the places from which private-sector investors can import or export hydrocarbons, fuels, and petrochemicals. Mexico’s Ministry of Energy—SENER—has canceled 1,866 permits for the import and export of gasoline, diesel, fuel, and crude.
These measures directly violate the national treatment obligation in USMCA’s Goods Chapter as well as the agreement’s limitations on import and export restrictions.
More generally, I believe Mexican regulators have violated the protections against discriminatory, arbitrary, and confiscatory measures in the Agreement’s Investment Chapter. I know some U.S. investors will be able to invoke USMCA’s ISDS mechanism to obtain compensation for these measures, which is important. But I don’t think USTR should rule out action to address these issues on a more systemic basis under USMCA’s state-to-state mechanism.
More generally, I want to stress that while my colleagues and I are concerned about the impact of the proposed Power Industry Law on Mexico’s greenhouse gas emissions, that law has not yet entered into force. Mexico has already subjected American oil and gas companies to dozens of arbitrary and discriminatory measures that will also result in an increase in Mexico’s greenhouse gas emissions, as well as jeopardize workplace safety in Mexico’s hydrocarbons sector.
For this reason, I urge USTR to evaluate potential USMCA claims involving ALL these measures.
I appreciate our witnesses here today., Thank you for taking the time to speak to us today. We look forward to hearing your views on these critical enforcement issues. Let’s start with Mark McHargue, the President of the Nebraska Farm Bureau.