Is USMCA at Risk? Colin Bird Breaks Down What Happens Next

[Transcript]

[00:00:00] Jan Griffiths: Welcome to the Automotive Leaders Podcast, where we help you prepare for the future by sharing stories, insights, and skills from leading voices in the automotive world with a mission to transform this industry together. I'm your host, Jan Griffiths. That passionate, rebellious farmer's daughter from Wales with over 35 years of experience in our beloved auto industry and a commitment to empowering fellow leaders to be their best authentic selves.

Stay true to yourself, be you and lead with gravitas, the hallmark of authentic leadership. Let's dive in.

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Canadian Prime Minister Mark Carney stood up in Davos in January of this year and said, we're in the midst of a rupture, not a transition. A rupture. He also said, you cannot live within the lie of mutual benefit through integration. When integration becomes the source of your subordination now that is particularly important as we get ready to sit down and talk about the USMCA trade agreement.

In less than 90 days, the US, Canada, and Mexico sit down to talk about the USMCA agreement, the agreement that binds our entire industry together. My guest today is a man who represents Canada right here in Detroit. Colin Bird is the consul general for Canada. He's a former counsel to the NAFTA Secretariat. He's represented Canada at the WTO, and he knows the architecture of this agreement inside and out. Colin, welcome to the show.

[00:02:36] Colin Bird: It is such a pleasure to be here with you, Jan.

[00:02:38] Jan Griffiths: Great to have you. So, how do you know so much about this agreement?

[00:02:43] Colin Bird: I have been working with our trade team for years now. I used to head up the trade policy team, at our embassy in Washington, when we renegotiated the NAFTA to come up with the USMCA or CUSMA as we call it in Canada. And so, I really pressed to come to Detroit in large part because so much of the conversation, when we renewed our trade agreement, was about how do we revitalize the manufacturing sector at the core of this continent, and coming to what I consider a binational integrated economic region with Detroit at its center. It felt like a great next step after having been involved in writing the rules for how we were going to do trade.

[00:03:31] Jan Griffiths: Yeah. So you had a key role in the agreement that we see today.

[00:03:37] Colin Bird: I was at the table, or I was in the room as we had the conversations, which as you might recall, started out a bit rock and roll, a bit more of a Beggar-thy-neighbor conversation at the beginning of that conversation.

And what developed as we moved along was thinking about what we had in common. We both wanted to increase wages for manufacturing workers across the board. We wanted to privilege those of us who have high labor standards and encourage high labor standards across the board in the North American industry. We wanted to make sure that there was advantages to being located here, bringing back investment, and manufacturing to the heartland of both of our country's manufacturing base. And so, the grand bargain that we really achieved with that renegotiation really assisted Mexico in what it was concerned about, which was raising wages for and working conditions for its workers.

It also really focused on bringing back investment and revitalizing manufacturing in North America. And if you look at the reality of what was accomplished, I mean, if you look at just Us manufacturing exports to Canada under the agreements since it was signed in the president's first term, it's over 20, I think, 26% increase in US manufacturing exports to Canada.

And on the Canadian side, we've seen both an increase in wages for our workers, but we've also seen a real change in investment. So, we had been seeing a lot of our domestic investors, a lot of foreign direct investments starting to move away from the Canadian ecosystem.

After we renegotiated that agreement, we've had some record breaking years on foreign direct investment into the Canadian ecosystem. Some of the offshoring of investment dollars that we had seen going to Asia, to Mexico, that really turned around. And part of that was clear rules of the road, and part of that was the commitment that all three countries had to help the industry catch up, frankly, to China and others on the EV space. And so, you had both of those factors going into what was a very significant reinvestment in manufacturing here in the heartland of the continent.

[00:06:06] Jan Griffiths: Yes. Yeah. Oh, it's fascinating. Now, we sit here today and we are 90 days away. Less than 90 days away.

[00:06:14] Colin Bird: Less than that.

[00:06:14] Jan Griffiths: From this now famous July 1, renegotiate USMCA or CUSMA date. What is that all about, Colin? What actually happens? Could you lay out the timeline for us?

[00:06:29] Colin Bird: So, what the review is, and it's a review and the text says a review, not a renegotiation. But what the intent was, let's not wait another 20, 25 years to amend a trade agreement, make sure that it's catching up to what has been a very dynamic time in international trade.

Let's review it. Is it still working for us? Is it meeting the goals that we had intended for it to review? And to make changes as appropriate. It is not a date at which the agreement ends it. It's a scheduled review in the process of a 16 year agreement.

There are a few issues that we are gonna be taking a look at. Those conversations have already begun. Our chief negotiators we named. The conversations between our two governments are underway. There are a few issues that the US has raised. There are some issues that Canada has.

Certainly, from our perspective, some of the Section 232 tariffs and other issues have been challenging the intent behind the agreement. And we need to look at that in the context of the review. But from our perspective, what we're hearing from industry on both sides of the border, and I think what the US government has been hearing from its own industry is that really what is required at a moment of great challenge to our industry is predictability, some certainty, some coordination in how we address challenges from offshore. And that's where the focus should be. So, we are looking to bring certainty back to the sector.

[00:08:11] Jan Griffiths: Ah, I love that. We're looking to bring certainty back because as I said in the opening, and Mark Carney said it beautifully, this is a rupture. The world has changed. The world in which you were part of the original negotiation of the agreement is no longer the same. It's completely different.

So, how challenging does that make this situation in July 1st? And I seem to be hanging onto this July 1st, but I guess what I'm hearing from you is it's just part of the process. Nothing is gonna change dramatically, July 1st.

[00:08:45] Colin Bird: So, the provision provides for review with all three countries, having an opportunity to sort of say, we're happy with where the agreement is, or we are happy with making these adjustments. If you don't get that thumbs up on July 1, it doesn't impact the agreement. The agreement stays in force. What it does mean is that it kicks off a series of annual reviews until such time as all three parties say, this agreement, these modifications work for us. We're prepared to go forward on that basis. But while those conversations are happening, the agreement stays in force.

We would like to have certainty for the industry sooner rather than later. And we're prepared in the conversations we've already had with the US government, are working to try to resolve issues so we can provide certainty as quickly as possible.

But what's really important, I think, is that we get this right. That we don't settle for the second best in terms of seeing greater barriers to what has been an integrated economic space, particularly in the auto sector. And because that is frankly, so much in the best interest of the United States, Canada, and Mexico. We are facing some really sharp challenges with the pace of change in the sector with the extent to which China has leapt ahead, particularly in the electric vehicle space.

We have to be working as efficiently, as seamlessly as possible here in North America if we're gonna meet that challenge. And what's vital for Canada is that, for the great pain, good jobs that this sector provides on both sides of the border, that we don't create new barriers that make it more difficult to compete globally.

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Yeah. Yeah. And we had President Trump in the Ford plant in Dearborn earlier this year talking about the agreement, and using the words irrelevant and coming across as if it's not that important to him. Now, you could say that's simply a posturing move for the negotiation, or in worst case scenario, he actually means it and wants to blow up the agreement. What are the options? What are the potential outcomes that we could see?

[00:11:40] Colin Bird: Both the US government, the Canadian government, the Mexican government, are extremely sensitive to what they hear from their own industry, what's working, what's required to have a vibrant manufacturing base here in North America.

And so, I listened very closely to what US industry is saying. What they see as some of the risks facing the sector. I know our government is listening to those voices on the Canadian side, on the US side, on the Mexican side, very closely.

They all lead us to a reality that there's a win-win outcome that can preserve what we have created here at North America in terms of reducing barriers to effectively building cars together, building vehicles together. And our focus is on maintaining that. And every leader, every negotiator has their own style.

We are now more used to President Trump's style than we might've been back in 2016 and '17, and we understand how a negotiation moves forward. We had some rocky moments the last renegotiation, the renegotiation that we did of the NAFTA. At the end of the day, mutual self-interest, a win-win outcome is possible. It's in the interests of the United States, it's in Canada's interests, and that's what we're gonna keep focused on.

[00:13:08] Jan Griffiths: I like what you said about governments listening to industry, because the industry, from my perspective, and I'm talking to a lot of different people in the industry all day long, is that we very much want to keep this agreement together.

We have formed this alliance and it, as I said, in the open, and it truly is the agreement that binds us all together. But I'm also hearing you say that, we're not being complacent about it. We're not saying, hey, we got this agreement. It's the greatest thing since sliced bread. And we're done recognizing that the world has changed. There are opportunities for improvement, and it is incumbent upon each one of the three players to come to the table and let's have that discussion and negotiation. So, I think that gives me a great sense of comfort that's the direction that we're headed in.

[00:14:00] Colin Bird: We are highly invested in the Great Lakes ecosystem, in particular, on the Canadian side. We want it to be world class. We want to be working with willing partners on the United States, and we need to avoid being our own worst enemies.

And the reality is, when you start disrupting supply chains that have been developed over 20, 30, 40 years in the region, when you put tariff barriers up between Michigan, Ohio, Indiana, Kentucky, and their largest export market, which is Canada. The only beneficiary of that, frankly, is the Chinese auto sector, which is looking for us to stumble. We need to keep the focus on avoiding the irritants that make us less competitive, and we need to do that together.

When you spoke about the Prime Minister's speech in Davos, we are very aware that we are in a globally competitive world, that some of the rules and systems that we have relied on for many years are more fragile than they have ever been. Confronting some challenges from offshore, some challenges from the United States. And in that context, Canada is certainly working to reduce barriers within our own economy, and really kickstart some of our work to make sure that where we have some geostrategic vulnerabilities in our supply chains, whether it's critical minerals or otherwise, that we have solutions and a robust supply chain here in North America.

But we need to be having that conversation together across this border and that means that we need to be avoiding taking shots at each other, but instead concentrating on how we can be the most competitive ecosystem in the world. We've done this before. We're experts at it, but we need industry voices. We need negotiators from governments who are focused on getting to, yes.

[00:16:10] Jan Griffiths: Yes.

[00:16:11] Colin Bird: And we are looking to get to, yes. But we need to be careful about hobbling ourselves right at a moment when we need to be working together more than we ever have before.

[00:16:22] Jan Griffiths: Yeah. We don't need this to be some sort of theatrical event or drama on display in the media. This needs to be very serious negotiation. And I really like what you said about people who are focused on getting to yes. Getting to an agreement that benefits all three parties together.

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[00:17:20] Colin Bird: Yeah, and that's the attitude that we're going into the conversations. And there are a number of people in the US government who really understand the industry and get that we make things together. It's not a win-lose on every job, when there are investments into Michigan, Ohio, that benefits the ecosystem in Canada, right? And to the extent that we are more, that we can create things more efficiently here in the Great Lakes region, that is to the benefit of both of us, and certainly the state governments in this region get it. They've been strong voices for not moving down the line of segmented markets in North America that would result in terrible inefficiencies, and frankly, create an opening for others to have better products at lower prices.

[00:18:11] Jan Griffiths: Yes. Well, we know the Chinese OEMs. We've stated it's an existential threat to the auto industry as we know it. And when we say the auto industry as we know it, that is the three of us together. That is Mexico, Canada, and the US together, and we have to fight that threat. But I have to tell you, I was driving in today and I was listening to that song, 99 Red Balloons. Remember that?

[00:18:37] Colin Bird: Yeah. Yes.

[00:18:37] Jan Griffiths: So, here's a question for you. 99 red balloons. 49,000 Chinese EVs. Why? I gotta ask you this question. I mean, I'm dying to know this. Why 49,000? Why not 50?

[00:18:52] Colin Bird: 49 is roughly equivalent to how many Chinese vehicles were coming into Canada in 2024 on the EV side, primarily Teslas from Shanghai. So, what Canada did, there has been no government more concerned about supporting the Great Lakes auto sector than Canada. We did it through a tariff agreement in concert with our American allies. A hundred percent GDS on EVs.

[00:19:21] Jan Griffiths: Yeah.

[00:19:21] Colin Bird: We've done it in concert with our American allies in trying to develop out an EV supply chain here in North America. And we got hammered. We got hammered on the agricultural side. And frankly, we got hammered by tariffs from the United States, which, from a Canadian perspective, there was an attack on our auto sector, and our part of a combined auto sector, both from China and from, and from the United States.

What we agreed to with the Chinese was to move from a tariff based measure to a hard cap that Canada controls. And so, if you look at that 49,000, it's equivalent to where we were before the tariff scenario, but it's a hard cap, which is a much more effective tool, frankly than a tariff.

[00:20:17] Jan Griffiths: Yes.

[00:20:17] Colin Bird: Because we control that tariff, we can help address some of the affordability issues. The Prime Minister spoke, has talked about the gap in the under $30,000 Canadian vehicle part of the market. And our government is very concerned about affordability for Canadians. It's not a part of the market that the North American industry has been focused on.

[00:20:42] Jan Griffiths: You are exactly right. Yes.

[00:20:44] Colin Bird: And so, to the extent that we can be sending a message about affordability, that is a concern both for the Canadian government and the US government. In this sector, I think, that's an important signal to send. But you have to look at that hard quota in the context of a very changing environment here in terms of the tariffs that are being imposed on Canadian assembled vehicles. You have to look at it also in terms of some of the changes to you now have the Polestar 3 being produced in the United States. You have had investments, Chinese investments coming into the sector on the battery side.

We watch that on the Canadian side, right? We are looking at some of the tariff agreements that the United States government has made with China over the last few months. We needed to be supportive of our agricultural sector. We also needed to be supportive of our auto sector. And that hard quota that's focused on an affordability solution for Canada was where we went.

But our bread and butter, the supply chains that give 500,000 Canadians jobs in this sector, all of that vibrancy is related to the work that Canada, the United States and Mexico have done together. That's what we're focused on, preserving and expanding.

[00:22:07] Jan Griffiths: So, the Chinese EV approach is part of a much broader strategy, 'cause I think there's some feeling sometimes that, okay, so on one hand we want everybody in on the USMCA agreement, but then, okay, now that there's developing these relationships with China over here in the auto industry, I'm hearing you say that, yeah, that's happening, but it's part of a much broader strategy.

[00:22:31] Colin Bird: Yeah, so Canada has put out an auto strategy. Our Prime Minister announced it. It includes continued reinvestment in helping the industry transition on the electric vehicle side, including renewing our consumer credits, including very significant increases to support investment in the sector in Canada, whether it was our regional tariff response fund, whether it's our strategic response fund that is a $3 billion fund to help support investment. We've done a lot on the investment side to we're now at, I think, a 4.5 percentage point advantage over the United States in terms of the taxation rate for investments in the auto sector.

So, we are looking at how we can help the sector that we have nurtured together. We are also looking at how we can continue to support the ability of the Great Lakes ecosystem to compete globally. And from our perspective, that needs to continue the conversations we had beginning with the first Trump administration straight through the Biden administration on being ready for the challenge that we were gonna face when the EV industry was fully mature in China, and how we needed to catch up and move forward.

In some ways, there's been a very significant change in policy on the US side. We are not moving away from a policy that's trying to assist our industry to address that threat, but we are looking to find ways to solidify amongst the three USMCA partners a winning strategy to be able to compete globally. We've been losing market share right around the globe.

[00:24:16] Jan Griffiths: Yes.

[00:24:18] Colin Bird: And we look at that, we look at some of the quality that's coming out of China now, at the price point that's coming out. We need to be working together to address unfair trade wherever it can be found, but it's not within the North American sector that we should be proceeding with Beggar-thy-neighbor policies. We need to be coordinating together, and I hope that will be the tenor of the conversation.

There will be some rough patches I'm sure, and some rhetoric that doesn't communicate. That happened the last time we negotiated, renegotiated this agreement. At the end of the day, I'm confident self-interest will bring us together and that's certainly the path that the Canadian government is seeking to follow.

[00:25:03] Jan Griffiths: Yeah, I was thinking about the Chinese EVs and I think part of the problem is that in the US and until recently, Canada. We haven't seen the Chinese EVs on the road. So people don't understand how big of a threat Chinese EVs, the Chinese OEMs are to this industry 'cause we just don't see the vehicles. So, you're gonna start to see the vehicles in Canada. Do you think those vehicles will come across the border? Could somebody drive, somebody could drive it across the border, right? They could do that.

[00:25:36] Colin Bird: The 49,000 vehicles that are provided for in the understanding we have with China, where they move and how they move, I think that's all for the future.

[00:25:47] Jan Griffiths: Yeah.

[00:25:48] Colin Bird: What we can do is make it clear that the Canadian government, the Canadian industry is going to work together to make sure that we are competitive globally, and we will talk with, as we will be watching when the president visits China in mid-May.

[00:26:07] Jan Griffiths: Yes.

[00:26:08] Colin Bird: We'll be following that closely. We have certainly took note of some of the comments that the president made while he was here in Michigan about being interested in Chinese investment and production here in the Midwest. So, we'll be following what our American partners do closely. What our hope is. What our goal is to work closely with our American partners.

[00:26:34] Jan Griffiths: We have to talk about tariffs Section 232. We all know it and love it. What is the impact been?

[00:26:43] Colin Bird: It has been a period of real challenge for our joint auto sector. And if you look at investment decisions, it is very hard to make decisions about investing. I talked to a number of companies in the Canadian companies, in the supply chain who are really in wait-and-see mode in terms of investments, frankly, on both sides of the border. It's meant a lot of red tape for our companies.

[00:27:17] Jan Griffiths: Which means cost.

[00:27:18] Colin Bird: Which means cost, which means burden, which means when you're not wanting your, sorry to all brokers out there, but broker jobs are not necessarily where we wanna focus, we wanna focus on good paying manufacturing jobs. And when you're having to focus on the red tape and satisfying the challenges of tariff rates that change on a dime, the good news is 84, 85% of Canada-US trade has been flowing tariff free because of the agreement that we have in place.

And that just highlights the importance of that agreement certainly to the auto sector, but across the board. We need to be freeing up our companies to do what they do best, which is to compete. And that means moving away from adding burdens to their bottom line.

I talked to, I was talking to a tier one company here in Michigan recently who was going, we're mostly eating it right now, but my tariff bill last year was 60 million. My profits are around 40 million, usually. You do the math. This isn't sustainable in the long term. We need an industry that can outcompete the world. That is not gonna happen if we divide up the North American market into fiefdoms with enhanced costs to move product across or to move supply chains.

So, has it hurt the Canadian industry? Absolutely, it has. But if you ask the Federal Reserve here in the United States, Michigan is the most affected state in the union. There's a real disproportionate effect that these tariffs have had on the Midwest in particular. If you look at the numbers, you know, down, I think, over 10% in terms of exports from the Detroit region to Canada, but you're also seeing something like a 67% increase in imports from China in 2025 in the Detroit region. That is not a policy that is accomplishing the goals of either of our governments. So, we need to, we need to get back to really what the design of the trade agreement was, which is to reduce barriers to trade amongst fair trading partners, and we wanna be your fair trading partner.

[00:29:43] Jan Griffiths: Going back to this idea, the Mark Carney quote, this is a rupture, not a transition. I can't get that out of my head because it's so well said. As leaders in the auto industry and our audience listening are watching this today, what should they be doing? Because when I was in supply chain in the auto industry, I didn't have to pay attention to policy decisions and what was happening in government and administration. And of course I would wanna pay attention to any trade agreements, but I didn't have the tab open of the White House executive orders page on my browser at all times, which now I do. So, it really is a rupture in the way that we work, the way that we think. What should leaders in the auto industry be doing right now as this date, this July date is coming up upon us.

[00:30:39] Colin Bird: Well, in North America, so I wanna be clear, yes, there is a role for tariffs to address unfair trade, and it's a very effective tool to do that. It's an own goal when you do it to yourself and to your own supply chains and that's what's been happening to us here in North America on the auto side.

Every political leader that I speak to, regardless of party, almost invariably, whether they support tariffs to address challenges from China or otherwise, they just don't get it when it comes to the US-Canada relationship. And I think that's the message that they need reinforced from the industry, that this is fundamentally challenging their capacity to compete globally, and that we need to be working with our fair trading, free trading partners and not against them. If we are going to continue to show what we have always done best, which is outcompete the rest of the world when it comes to manufacturing.

[00:31:43] Jan Griffiths: So, they should get their voices heard in their position, heard through trade organizations, through their local representatives.

[00:31:52] Colin Bird: Absolutely. Whether it's governors, and here the governor of Michigan, Governor Whitmer has been a forceful voice because of the impacts that these tariffs have been having on the state of Michigan. But right across the region, there are leaders, whether it's local mayors who have to understand how these federal policies are impacting the facility in their region, and communicating that up to USTR. I was very impressed by the voices who spoke out at the hearings in Washington on the review of the USMCA agreement. They were very clear, very articulate in explaining how we needed to sort of renew the partnership in USMCA. But that message cannot be delivered too many times to political leaders.

[00:32:46] Jan Griffiths: So, I'm hearing a very clear call to action for leaders in the auto industry to make sure that they can articulate their position, that they understand the impact to their business of not keeping this agreement together, and make sure that they both educate and get the message out to whether it's the mayor or it's their local organizations or local representatives because there is a huge element of education and knowledge in this, and we cannot stand by and do nothing and just wait for July. Now is the time. We've got a short window here. Let's make sure that we're taking action to communicate and get our position known.

[00:33:30] Colin Bird: Yeah. And let's not settle for second best. Let us really try to think about how we can work together to address unfair trade from offshore, to improve infrastructure, to the rules have been working for us internally. But we need to get back, we need to get back to free trade amongst fair trading partners.

[00:33:52] Jan Griffiths: Yeah.

[00:33:53] Colin Bird: And we need that voice to be heard in Washington and elsewhere.

[00:33:56] Jan Griffiths: And that's a beautiful way to close today. Colin Bird, we are in this together. Let's continue to make this automotive industry strong and powerful, shall we?

[00:34:07] Colin Bird: That sounds like a plan.

[00:34:08] Jan Griffiths: Let's do it.

[00:34:08] Colin Bird: Thank you so much.

[00:34:09] Jan Griffiths: Thank you.

Thank you for listening to the Automotive Leaders Podcast. Click the listen link in the show notes to subscribe for free on your platform of choice, and don't forget to download the 21 Traits of Authentic Leadership PDF by clicking on the link below and remember. Stay true to yourself, be you, and lead with gravitas, the hallmark of authentic leadership.