CSCMP's Supply Chain Quarterly
February 25, 2020
Forward Thinking

Logistics providers cheer White House passage of USMCA

New trade deal will bring long-awaited clarity to chaotic business conditions, say retailers, railroads, parcel carriers.

Logistics companies in many corners of the industry are cheering the official signing today of a new North American trade agreement that they hope will delivery much-needed clarity to a business climate that has been roiled by a global manufacturing slowdown, trade wars, and a presidential election cycle.

President Donald Trump signed the United States-Mexico-Canada Agreement (USMCA), that will update and replace 1994's North American Free Trade Agreement (NAFTA) with promises to streamline cross-border shipments by addressing customs administration and trade facilitation.

The new agreement will impose tougher rules on labor and automotive content but will leave $1.2 trillion in annual U.S.-Mexico-Canada trade flows largely unchanged, according to published reports. One more step remains before the USMCA can take effect, as it must still be ratified by Canada's parliament, since Mexico has already approved the deal.

Once enacted, the deal will clear up the confusing trade conditions that have prevailed in recent months, according to Washington, D.C.-based trade group the Retail Industry Leaders Association (RILA).

"The certainty this newly negotiated deal brings will allow retailers to invest, plan for the future, create jobs, and provide their customers with the widest possible selection of affordable and quality products," RILA President Brian Dodge said in a release. "This deal is particularly important to grocers who rely heavily on trade with Mexico to supply affordable produce to American families, and its enactment will ensure those trade relationships continue."

Likewise, the National Retail Federation (NRF), which has often criticized Trump's on-again-off-again tariff policies for creating confusing business conditions and for imposing financial penalties on consumers, praised the passage of the bill.

"We believe this agreement will bring continued decades of economic prosperity that will benefit American consumers and the millions of U.S. workers whose jobs depend on the free flow of trade with our nation's two closest trading partners," NRF President and CEO Matthew Shay said in a release. "Goods and materials have easily crossed North American borders for more than a quarter-century, and this modernized agreement will do the same for the new digital economy and set the stage for innovations yet to be seen." 

Cargo carriers also applauded the bill's passage, with the Association of American Railroads (AAR) pointing out that international trade accounts for 42% of U.S. freight railroads' carloads and intermodal units, and is associated with more than 35% of rail revenue.

"Thanks to the tireless efforts at both ends of Pennsylvania Avenue, renewed trade ties with our closest neighbors will benefit all three countries for years to come," AAR President and CEO Ian Jefferies said in a release. "As an industry built on connecting goods and businesses, railroads know that free and fair trade makes both our supply chains and individual economies stronger. Coupled with the Phase I trade deal with China, USMCA will provide certainty rail customers and American businesses need to grow and compete in world markets."

Easing the flow of cross-border trade will also be good for logistics and parcel delivery operations, according to FedEx Corp.

"FedEx applauds Congress and the Administration for approval of the U.S.-Mexico-Canada Agreement (USMCA)," FedEx President and COO Raj Subramaniam said in a release. "This agreement will help to streamline trade across the North American market, which is of critical importance to FedEx and our customers. Highly integrated North American supply chains will continue to benefit all three economies and make them more competitive around the world."

Ben Ames is Editor at Large and a Senior Editor at Supply Chain Quarterly’s sister publication, DC Velocity.

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