United States-Mexico-Canada agreement set to replace NAFTA


October 22, 2018

On Oct. 1, the United States, Mexico, and Canada formally agreed to a revision of the North American Free Trade Agreement (NAFTA). This has been an item on President Donald Trump’s agenda since the beginning of his presidency. In addition, Trump declared his dislike towards NAFTA during his campaigning for office. This revision, upon final ratification and implementation, will replace NAFTA if it is signed, and the new standing free trade deal for North America will be the Untied States-Mexico-Canada Agreement (USMCA).

The provisions of the USMCA will be more expansive than those of NAFTA. These provisions regard manufacturing and manufactured products, agricultural trade, labor conditions, digital trade, intellectual property, environmental rights, and more.

One major result of the USMCA is that the Canadian dairy market was opened up to American farmers. The United States will now have tariff-free access to 3.6 percent of the Canadian dairy market, which is valued at $15.2 billion. Also, Canadian consumers will have greater duty-free access to U.S. markets, because the duty-free limit was raised from $20 to $150.

USMCA also aims to have a greater portion of automobiles manufactured in the member nations, rather than oversees. In order to accomplish this, provisions of the deal state an automobile must have at least 75 percent of its components manufactured in North America in order to be free of tariffs. Previously, this threshold was 62.5 percent. Furthermore, 30 percent of the work done on these automobiles must be done by workers earning more than $16 per hour. NAFTA was credited with strengthening the economic ties between these three nations, largely due to the auto industry. This is especially seen between the United States and Mexico because the border separating these nations is home to extensive supply chain connections. Also, through this deal, Mexico and Canada are assured they are not on the receiving end of previously threatened hefty auto tariffs.

Intellectual property protections and laws were updated as well. More strict and extensive protections for parents and trademarks were implemented. These largely focus on biotech, financial serves, and domain names. Many legal experts say this was necessary since NAFTA was signed about 25 years ago, and the agreements were outdated.

The United States-Canada-Mexico Agreement’s Key provisions will likely not take effect until 2020, and it must be re-signed every six years. This is because the leaders of the countries have to sign the deal, and then legislatures in Mexico and Canada must approve of the deal. The USMCA aims to improve the North American economy more than NAFTA was able to.

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