Canadian Finance Minister Bill Morneau told Bloomberg TV that ratification of the United States-Mexico-Canada Agreement is “critically important.”
Morneau said he remains optimistic the deal will be ratified by all three countries, even as Canada faces an October election, which could result in a change in power.
“We see the ratification of the USMCA as critically important,” Morneau told Bloomberg Surveillance Thursday on the sidelines of a meeting between G7 finance chiefs in Chantilly, France. “It enables investor confidence.”
The new trade pact has serious ramifications for the auto industry.
Under the new pact, the trio of countries agreed to increase the regional content share requirement in light vehicles to 75 per cent from 62.5 per cent —under a four-year phase-in period beginning in 2020. They also incorporated a clause in the new deal that mandates that 40 per cent of the value of a vehicle traded within the region must originate from factories where the average wage is US$16 per hour. Since employees in the Mexican auto manufacturing sector earn, on average, around USD $3 an hour, certain auto producers in Mexico will require a greater share of U.S. or Canadian auto parts.
Morneau also addressed the rising Canadian dollar, which impacts Canadian auto exporters — a more valuable loonie means lower profits — and a growing disparity between Canadian and U.S. interest rates.
You can watch the entire interview in the player below.