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Americas Act Highlighted at Partnership for Americas

It's not realistic to believe Canada, Mexico and the U.S. would be ready to admit more members to the USMCA before their presidential contests in 2024 or Canada's parliamentary elections in 2025, panelists said at a program hosted by the Council of the Americas. But Juan Carlos Baker, Mexico's former chief negotiator for the NAFTA successor, said the six-year review in 2026 would be a perfect time to make accession a possibility.

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The Council asked Baker to produce a brief that explains why it would be advantageous to add more countries to the trade pact, and how it could be done, without explicit language in the pact about accession. "An expansion strategy should emphasize resilient supply chains, nearshoring strategic activities, trade facilitative measures, clean technologies, workers’ rights, non-market economy considerations and the digital economy -- precisely the disciplines that were translated in the USMCA into chapters including Customs Administration and Trade Facilitation, Trade Remedies, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Intellectual Property, Digital Trade, State-Owned Enterprises, Labor, Environment, Anticorruption, and Good Regulatory Practices, to name a few," he wrote.

On a webinar Sept. 14, Baker said that even without an accession clause, there is language that can allow the addition of other countries through the USMCA commission, because it has the authority to modify or amend the deal.

"I believe it’s not really a matter of making the economic case, I think that’s pretty much straightforward," he said. And it's not really a legal issue. "I think it’s really a matter of political willingness for that to happen," he added.

Baker did not address why Mexico would be interested in adding other countries to the USMCA, which presumably could create competition for foreign direct investment.

He said even if the countries didn't decide to start admitting a new country in 2026, they could "establish what are the next steps going to be in this regard."

Baker said a country that already has a free trade agreement with all three USMCA countries, that has said it wants to join, and has a track record of fulfilling its trade commitments, would be the best place to start, and he said Costa Rica should be first.

Costa Rica's Trade Minister Manuel Tovar said Costa Rica has not been shy in saying it should join USMCA. The Dominican Republic-Central America Free Trade Agreement, known as CAFTA-DR, "has provided us market access and allowed us to pass long overdue reforms" in telecommunications and insurance, he said. "However, today CAFTA is a tight fit. Our economy is not the same one as when we negotiated CAFTA." Costa Rica has moved up in the value chain, he said, and 40% of its exports are medical devices. It would like to move into automotive and aerospace manufacturing, both strengths of Mexico. He said Costa Rica would like its components to be accumulated with Mexican production to meet regional rules of origin.

CAFTA allows accumulation to meet its own rules of origin, but Tovar said his country's economy is more aligned with Mexico and the U.S. than it is with its Central American neighbors or the Dominican Republic, which is part of CAFTA. He said his country will "continue watering the seed; when conditions are ready, we are confident the right step will be taken."

The administration has offered the Americas Partnership for Economic Prosperity as a way to update older trade agreements, but he said there has not been much activity on that front. "Hopefully this will heat up in the next weeks and months," he said.

The Americas Act, a bill introduced by Sen. Bill Cassidy, R-La., and Sen. Michael Bennet, D-Colo., describes a process for countries to join USMCA, and both senators participated in the webinar.

Council of the Americas Vice President Eric Farnsworth asked Cassidy why increasing economic ties in the Western Hemisphere is so important to him. Cassidy gave an example -- saying that 60% of U.S. funds spent in Mexico return to the U.S.; less than 10% of U.S. spending in China returns to the U.S.

He said as Mexico becomes more prosperous, it benefits the U.S. and that would be true for Peru or Central American countries, too.

Bennet said Senate colleagues are talking to him about the proposal, as they recognize the U.S. has not been active enough in engaging with its southern neighbors.

In order to counter China's growing influence in manufacturing, "I think the United States has to show up," he said. Adding countries to USMCA is more efficient than trying to negotiate updated FTAs country by country, he said.

"I know that there are existing trade relationships in the region, but if you look at the past 50 years, you see these arrangements were developed to address the concerns of their time," he said. "I think we have a chance here to update the agreements to make sure we’re not treating Costa Rica and Nicaragua the same, which makes no sense of all."

Cassidy said he appreciated Bennet coming on to the bill, as it has gotten the White House more involved. He said Chris Dodd, an emissary to Latin America appointed by President Joe Biden, "has become the biggest cheerleader of this proposal."

"Nothing happens in this town unless you get 60 votes" in the Senate, he said, which makes bipartisanship crucial.

While the idea of adding more countries to the USMCA may seem far-fetched, as liberalizing trade has fallen out of favor in both parties, Tovar said it's more attainable than people think. He said that when his country first sought to join the Organization for Economic Cooperation and Development, some thought it was "a quixotic and crazy endeavor." Costa Rica was added to the OECD in 2021. "We truly believe that our bold move to request admission to USMCA" is in the same spirit.

"We’re very happy that there’s this growing debate in Washington on trade. Trade really matters," he said. "We truly believe Costa Rica deserves a jacket that fits better than CAFTA."