United States-Mexico-Canada Agreement


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Closeup of the flags of the North American Free Trade Agreement NAFTA members on textile texture. NAFTA is the world's largest trade bloc and the member countries are Canada, United States and Mexico. 3D rendering with detailed textured grunge effect on closeup.

Kayli Mak, Staff Writer

Just before midnight on Sept. 30, the U.S., Mexico, and Canada struck a deal on trade between the three countries. The new arrangement, known as the United States-Mexico-Canada Agreement (USMCA), is meant to replace the current deal, the North American Free Trade Agreement (NAFTA).

Up until the confirmation of the new arrangement, it seemed as if Canada would be left out of the new trade deal, as U.S.-Canada relations over trade have been strained for the last couple of weeks. This is likely due to tariffs on the imports of steel and aluminum from both Canada and Mexico. However, Mexico had agreed to an arrangement back in August, but Sunday, Oct. 1 was the deadline for Canada to join in.

Hundreds of pages of the agreement were released on Oct. 1. According to those pages, the USMCA allows the U.S. to receive more imported Canadian and Mexican cars and it also opens up the Canadian dairy market. Specifically, as part of the agreement, American farmers will gain access to 3.5% of the Canadian dairy market, which makes approximately $16 billion annually.

For the automobile industry, cars and trucks must have a minimum of 75% of their parts manufactured in North America to avoid tariffs. This is an increase from the 62.5% NAFTA required. The goal of this increase is to encourage the manufacturing of auto parts in North America by making it more efficient to use American-made parts over parts from Asia. This portion has sparked controversy, as China sees this as an attack on its ability to expand trade with Canada and Mexico.

The USMCA also outlines labor provisions and worker protection in all three countries. It calls for workers to make 40% to 45% of automobile parts and earning at least $16 an hour by 2023. This requirement is meant to improve labor conditions specifically in Mexico, in order to bring them up to the standards of both the U.S. and Canada. The Trump administration intends for the higher wages to discourage American companies from moving their factories across the southern border.

In addition, the arrangement has increased copyright terms from 50 years after the death of the author to 70 years after the death of the author. The deal also fixes the issues where NAFTA fell short due to its age, such as the digital economy. It removes duties on electronically-purchased items and provides protections for Internet companies.

Investors are less protected than they were under NAFTA, as the USMCA has prohibited investors from suing the government over damage to future profits. This provision, in particular, has been praised for preventing companies from challenging governmental health and environmental regulations.

The USMCA is set to be reviewed every six years. It also has a 16-year sunset clause, meaning it will expire in 16 years. Many of the provisions outlined in the USMCA will not go into effect until 2020, but the agreement will change many of the parts of NAFTA.

Photo courtesy of AUTOBLOG.COM