What the New US-Canada-Mexico Trade Agreement Means for Shoe Companies
Late Sunday night, the United States, Mexico and Canada finally agreed to a trade deal that will retool the North American Free Trade Agreement, bringing to a close more than a year of heated negotiations.
The White House announced that the deal will be called the United States Mexico Canada Agreement (USMCA) — keeping the name NAFTA seemed unlikely given that President Donald Trump has repeatedly trounced it as “the worst trade deal maybe ever signed anywhere” — and will include provisions for the dairy and auto industries, among the most contentious areas under dispute between Trump and Canadian Prime Minister Justin Trudeau.
For the footwear industry, the new agreement looks largely the same as the old one, says Matt Priest, president and CEO of the Footwear Distributors and Retailers of America. “That was always going to be our understanding throughout this entire process,” Priest told FN.
Under NAFTA, the countries don’t levy tariffs against one another’s shoe imports (despite Trump’s claims about Canadians’ “smuggling” shoes across the border). And while the FDRA has past pushed for more flexible rules of origin — the criteria that determine whether goods get preferential tariff treatment due to their country of origin — that wasn’t on the table in recent negotiations and runs counter to the administration’s protectionist policies.
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“So for us, it was more of a matter, for a time, of will we withdraw or will it be canceled?” Priest continued. “Those were concerns that we had, and we continuously voiced our concerns about the need to continue in agreement with Mexico and Canada.”
Now that a trilateral agreement has been reached, he’s hopeful that the U.S. Trade Representative’s office will now have the resources to pursue other deals abroad with countries like Japan and the Philippines, and ideally with major footwear suppliers like Vietnam. (China, of course, remains at an impasse with the U.S. as the trade war between the two nations escalates.)
NAFTA also isn’t the first agreement Trump has threatened to pull out of — the U.S. withdrew from the 11-country Trans-Pacific Partnership during his first week in office. “We thought that was very shortsighted, and continue to think that,” said Priest. “And so I haven’t been entirely impressed with the pace for which the administration has negotiated trade agreements because there was a commitment that we would have these amazing bilaterals — the greatest trade agreements of all time would be negotiated — and instead we’ve been updating old ones.”
He added, “Hopefully, this does free up some bandwidth, some manpower for the administration to pursue other, more progressive agreements.”
Other trade associations also offered support of the new USMCA deal. National Retailer Federation president and CEO Matthew Shay called it “critical to protecting North American supply chains that support millions of American jobs.” He said his organization would “carefully review all the details of the agreement to ensure it promotes U.S. economic growth and maintains access to the products American families need at the prices they can afford.”
“This shows that all three countries recognize the importance of the trilateral trading arrangement that has been fostered and supported by NAFTA during the past 24 years,” American Apparel & Footwear Association president and CEO Rick Helfenbein said in a statement. “We also remind the administration of the need to seamlessly implement this new agreement so that companies are able to adjust to the new trading rules.”
Before the agreement goes into effect, Congress will need to ratify it (as will the house’s equivalents in Canada and Mexico). The vote will be brought to the floor in 2019, after the midterm elections, leaving some to speculate that lawmakers may still take issue with some parts of the deal, particularly if Democrats take control of the house.
