After months of negotiations and several rounds of discussions, the United States, Mexico, and Canada finally reached an agreement on a new trade deal that replaces the 24-year-old North American Free Trade Agreement (NAFTA). The new agreement is called the United States-Mexico-Canada Agreement (USMCA). The new deal was signed on November 30, 2018, by the leaders of the three countries, and it is expected to be ratified by each country`s respective legislature.
The new USMCA trade agreement is designed to modernize NAFTA, which was considered outdated and in need of revision. One of the main goals of the USMCA is to increase the number of American products sold in Canada and Mexico, while also increasing the trade of products between the two countries. The agreement will also enhance intellectual property protections and labor standards, as well as encourage the production of more cars and automotive parts in North America.
There are several key changes in the USMCA compared to NAFTA. One of the most significant is the revised rules for the automotive industry. The new agreement mandates that at least 75% of a vehicle`s content must be made in the United States, Mexico, or Canada for it to qualify for tariff-free treatment. The agreement also requires that 40-45% of a vehicle must be made by workers earning at least $16 an hour. This is to promote the production of cars and automotive parts in North America and to prevent outsourcing to other countries where labor is cheaper.
Another major change is the inclusion of a new chapter on digital trade. The USMCA recognizes the importance of digital trade in today`s economy and includes provisions to protect intellectual property rights, prohibit data localization requirements, and prohibit customs duties on digital products.
The agreement also includes a dispute settlement mechanism that is similar to the one used in NAFTA. However, the USMCA includes some changes that are intended to make the process more transparent and to allow for better enforcement of trade rules.
The USMCA has been received positively by the business community, as it provides certainty and stability for North American trade. However, it is not perfect and there are still some concerns, particularly in Canada, about the agreement. Some critics argue that it could increase the price of prescription drugs and that it does not do enough to address environmental concerns.
In conclusion, the new USMCA trade agreement represents a significant improvement over the outdated NAFTA. While there are still some concerns, overall the agreement is a win for North American trade and is expected to benefit all three countries in the years to come.