WASHINGTON – US, Mexican and Canadian business groups applauded a new North American trade deal's entry into force on Wednesday, but said more work and flexibility was needed to overcome challenges including implementation of new labor and automotive rules.

The US Chamber of Commerce, the Canadian Chamber of Commerce and Mexico's Consejo Coordinator Empresarial said in a joint statement that the new US-Mexico Canada Agreement provides certainty for business investment in the region.

The replacement for the North American Free Trade Agreement (NAFTA) launches under a cloud of disputes, with the United States considering new tariffs on Canadian aluminum and growing concerns over Mexico's ability to meet new labor standards in the deal.

"Overall, the agreement increases our region´s competitiveness, which is vital in an uncertain international context characterised by protectionist temptations," the groups said in a statement. "Nevertheless, the agreement was less than hoped for in areas such as intellectual property, procurement, and labor mobility."

The groups said that North America's largest industry, automotive, will have difficulty complying with new, tighter regional content rules for vehicles and parts.

"New rules in a number of other areas, such as labor, will also present compliance challenges. The Covid-19 pandemic and economic downturn may make adapting to these new rules even more challenging," the groups said.

They added that governments should refrain from the use of tariffs on national security grounds, a comment aimed at the Trump administration as it considers reimposing a 10% duty on Canadian aluminum to halt a "surge" in imports across the northern border that began after a tariff exemption was granted last year.

Steel industry groups also said the trade deal's requirement that 70% of the steel used in regional auto production be North American-made would boost and demand strengthen the regional supply chain. "Our steel producers are prepared to supply the steel their auto and other customers need to meet the new regional value content requirements of the USMCA," said Kevin Dempsey, interim president of the American Iron and Steel Institute.