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Canada is joining Mexico in formally disputing how the U.S. interprets rules governing the origin of vehicle parts under the trilateral trade agreement between the countries.
The country will join Mexico in requesting the creation of a tribunal of experts to rule on the matter as allowed under the U.S.-Mexico-Canada Agreement, known as USMCA, Trade Minister Mary Ng said in a statement. Mexico formally made the request last week.
The move is an escalation by Canada, which had previously said it was monitoring talks on the issue between the U.S. and Mexico. Bloomberg News was first to report Canada’s plans to participate in the dispute last month.
The conflict focuses on differences over how to calculate the percentage of a vehicle that comes collectively from the three countries. Both Mexico and Canada believe the trade deal stipulates that more regionally-produced parts should count toward duty-free shipping than the U.S. wants to allow.
The U.S. interpretation is inconsistent with the trade pact rules and “the understanding shared by the parties and stakeholders throughout the negotiations,” Ng said in the statement, referring to the talks in 2017 and 2018 that produced the updated North American trade pact.
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