In November 2018, the Trump Administration signed the United States-Mexico-Canada Agreement (USMCA), which replaced the North America Free-trade Agreement (NAFTA). Before the election, Trump had disparaged NAFTA as a betrayal of America workers. Experts, however, see this new treaty as a refinement of NAFTA under a different name. Nevertheless, this treaty has some important improvements.
The new treaty requires that 40-45% of cars produced by member nations be made by workers who are making at least $16 an hour by 2023. Mexico will pass laws that expand labor protections and give workers the right to unionize. Automakers must source at least 75% of their parts from within the three countries (up from 62.5%), and the US agreed to close the NAFTA loophole that allowed it to place tariffs on automotive parts earlier this year. Canada will open its markets to more US dairy and poultry. And more intellectual property and e-commerce regulations will be standardized: financial service data requirements can no longer be localized, all copyrights have to be protected with the same rigor as domesticate ones, copyrights extend to 70 years after the creator’s death, drug patents extend to 10 years, and new protections will exist for internet companies and digital content. Furthermore, member nations have to opt-in to the agreement every 16 years and review its terms every six years.
The USMCA’s emphasis on equalizing labor, promoting trade, and standardizing regulations will help regionalization. Putting labor on a more level playing field helps deter labor exploitation and overseas outsourcing. Promoting trade mutually grows the three economies. Standardizing regulations helps commerce flow and protects investments. And forcing a periodic review helps ensure USMCA continues to adapt. All of these are healthy outcomes for the region.
While the treaty still has to be ratified by the Senate, USMCA is important for developing the region. Ratifying the USMCA is one of the most practical things the US could do to position itself for the future.
References:
Vox, “USMCA, Trump’s new NAFTA deal, explained in 500 words,” 5 Feb 2019.
Marketplace, “The winners and losers of NAFTA 2.0,” 1 Oct 2018.
Fox Business, “NAFTA 2.0: What to Know,” 30 Nov 2018.
Compliance Week, “Businesses back NAFTA 2.0, bur ratification no slam dunk,” 4 Mar 2019.