NAFTA is officially gone. This is what has changed and what has not changed.


The new deal was signed by Trump and his Mexican and Canadian counterparts in 2018 and passed by Congress earlier this year after Democrats added stronger labor rules.

The president touted it as a major political victory before his re-election campaign, but has since been overshadowed by the coronavirus pandemic and other crises.

Much of the USMCA simply updates the 25-year agreement it is replacing. It is expected to create 176,000 jobs after six years and increase US GDP by 0.35%, according to a report released last year, long before the pandemic, by the US International Trade Commission. ., A federal government agency. In comparison, the United States added more than 152,000 jobs in January 2020 alone.
But the deal provides certainty to business groups and farmers who feared Trump would tear NAFTA apart without having a new deal, a move he threatened several times.
The USMCA contrasts with Trump’s efforts to renegotiate trade terms with China. After more than a year of negotiations, a preliminary agreement signed in January does not resolve major problems with intellectual property theft and forced technology transfers. It leaves tariffs on billions of dollars in goods and it’s unclear whether China will keep its promise of more than double its purchases from US farmers.
Trump opted for bilateral deals and signed new deals with South Korea and Japan. It pulled the United States out of the 12-country Trans-Pacific Partnership, known as the TPP, which was negotiated by the Obama Administration.

Here are some of the key changes to the USMCA:

Automotive Manufacturing Boost

The USMCA creates a new incentive to build cars and trucks in North America. It requires that 75% of a vehicle’s parts be manufactured in one of the three countries, above the current rule of 62.5%, to stay duty-free when moving between the three signatory countries.

It also requires workers to earn more vehicle parts that earn at least $ 16 an hour, which can boost manufacturing in the United States, where wages are higher than in Mexico.

The International Trade Commission report found that these changes would add 28,000 jobs in the industry over six years, while also leading to a small increase in the price of vehicles paid by consumers. However, a report from the Trump administration was more positive, projecting that the deal would create 76,000 auto jobs in five years.

Strengthened labor laws in Mexico

Manufacturing workers have long blamed NAFTA for sending jobs to Mexico, where wages are lower, and it was a priority for Democrats that the USMCA strengthen enforcement of labor standards, creating a more level playing field for American workers.

Democrats struck a deal with the Trump administration to strengthen the enforcement language in the deal. The changes garnered the support of the AFL-CIO, the largest union federation in the United States.

The agreement provides for an inter-institutional committee that will supervise the implementation of the labor reform in Mexico and the fulfillment of labor obligations. Also, for the first time in any US trade agreement, it allows “quick response” panels to review whether specific facilities are violating workers’ rights and to collect tariffs or penalties on products manufactured at those facilities.

US dairy producers gain more market access

The original NAFTA eliminated tariffs on most agricultural products traded between the three countries. Canada and Mexico are already the two largest export markets for American farmers and ranchers.

The USMCA will keep those tariffs at zero, while further opening the Canadian market to dairy, poultry and eggs from the United States. In return, the United States will allow more Canadian dairy, peanut and peanut products, as well as a limited amount of sugar, to cross the border.

NAFTA update for the digital age

The USMCA includes new benefits for the technology sector, in a chapter on digital commerce that was not part of the original NAFTA. The new provisions are not expected to directly create new jobs, but they could provide a boost to American companies in other ways.

For example, the new trade agreement prohibits Canada and Mexico from forcing US companies to store their data on servers in the country. It also ensures that US companies cannot be sued in Canada and Mexico for much of the content that appears on their platforms.

Environmental protections

The agreement provides $ 600 million to address environmental problems in the region, such as Tijuana’s sewage spills that affect San Diego, and makes regulations easier to apply by removing the requirement to demonstrate that a violation affects the Commerce.

While the new enforcement measures pleased most Democrats, they did not go far enough to get environmental groups like the Sierra Club to support the deal.

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