The United States, Mexico, and Canada Agreement (USMCA) has been making headlines lately. This trilateral trade agreement, which was signed on November 30, 2018, replaces the North American Free Trade Agreement (NAFTA) that had been in place since 1994.
Unlike its predecessor, the USMCA takes into account new developments in the global economy, such as e-commerce, digital trade, and intellectual property rights. In addition, the agreement includes provisions to protect workers` rights and the environment.
One of the most significant changes in the USMCA is the increase in the percentage of North American content required for automobiles to qualify for duty-free treatment. The new rules stipulate that 75% of a car`s parts must be manufactured in North America (up from 62.5% in NAFTA), and at least 40-45% of the car must be made by workers earning at least $16 an hour.
Another key change is the elimination of Chapter 11 of NAFTA, which allowed companies to challenge government regulations outside of domestic courts. The USMCA also includes a sunset provision, which means that the agreement will expire after 16 years unless all three countries agree to renew it.
The USMCA was ratified by the Mexican Senate on June 19, 2019, and by the Canadian House of Commons on March 13, 2020. However, it faced some opposition in the United States Congress. Democrats in the House of Representatives raised concerns about labor and environmental protections in the agreement, as well as enforcement mechanisms.
After months of negotiations, the USMCA was finally passed by the US Congress and signed into law by President Trump on January 29, 2020.
Now that the USMCA is in effect, what does it mean for businesses and consumers? For one, it provides more certainty for trade in North America, which is a significant advantage for companies that rely on cross-border commerce. The agreement also includes provisions to protect intellectual property rights, which benefits industries such as pharmaceuticals and technology.
Overall, the USMCA represents a modernized version of NAFTA that addresses some of the flaws in the previous agreement. While there may be some challenges in implementing the new rules, especially in terms of increased labor and environmental protections, the USMCA is a positive development for North American trade.