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United States–Mexico–Canada Agreement

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"USMCA" redirects here. For the geographic code, see UN/LOCODE:USMCA. For the air branch of the United States Marine Corps, see United States Marine Corps Aviation.
USMCA
  • United States–Mexico–Canada Agreement (English)
  • Tratado entre México, Estados Unidos y Canadá (Spanish)
  • Accord États-Unis-Mexique-Canada (French)
TypeTrade agreement
Drafted30 September 2018
Signed30 November 2018
EffectiveNot in force
ConditionRatification by all signatories
Expiration16 years after entry into force (renewable)
Negotiators
Languages

The United States–Mexico–Canada Agreement (USMCA; Spanish: Tratado entre México, Estados Unidos y Canadá, T-MEC[1][2]; French: Accord Canada–États-Unis–Mexique, ACEUM[3]) is a free trade agreement between Canada, Mexico, and the United States of which negotiations have been concluded, and agreed. It is also referred to as "NAFTA 2.0",[4][5][6] in order to distinguish it from its intended current predecessor North American Free Trade Agreement (NAFTA). It is the result of the 2017–2018 renegotiation of NAFTA by its member states, which informally agreed to the terms on September 30, 2018, and formally on October 1.[7] The USMCA was signed by United States President Donald Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau on November 30, 2018 as a side event of the 2018 G20 Summit in Buenos Aires. Each country's legislature still must ratify the agreement.

Compared to NAFTA, the agreement gives the U.S. more access to Canada's $19 billion dairy market, incentivizes more domestic production of cars and trucks, increases environmental and labor regulations, and introduces updated intellectual property protections.

Background

The United States–Mexico–Canada Agreement is based on the North American Free Trade Agreement which originally came into effect on January 1, 1994. The present agreement was the result of more than a year of negotiations including threats of tariffs by the United States against Canada in addition to the possibility of separate bilateral deals instead.[8]

During the 2016 US presidential election, Donald Trump's campaign included the promise to re-negotiate, or cancel if re-negotiations fail, the North American Free Trade Agreement.[9] Upon election, President Trump proceeded to make a number of changes affecting trade relations with other countries. Withdrawing from the Paris Agreement, ceasing to be part of negotiations for the Trans-Pacific Partnership, and significantly increasing tariffs with China were some of the steps he implemented, reinforcing that he was serious about seeking changes to NAFTA.[10]

Negotiations

An initial agreement between the United States and Mexico was reached before finalization with Canada. Since Mexico’s outgoing president, Enrique Peña Nieto, will leave office on December 1, 2018, and 60 days are required as a review period, the deadline for providing the agreed text was the end of September 30, 2018. Negotiators worked around the clock and completed the agreement less than 1 hour before midnight of that date on a draft text. The draft is still subject to "Legal Review for Accuracy, Clarity, and Consistency" and as of November 2018 only available in English, although the Spanish and French versions will be equally authentic.

The agreement will take effect after being signed and ratified by each country. For the latter step, it has to be passed into law by each country.[11]

Provisions

Provisions of the agreement cover a wide range, including agricultural produce, manufactured products, labor conditions, digital trade, among others. Some of the more prominent aspects of the agreement include giving US dairy farmers greater access to the Canadian market, guidelines to have a higher proportion of automobiles manufactured amongst the three nations rather than imported from elsewhere, and retention of the dispute resolution system similar to that included in NAFTA.[11]

The dairy provisions are similar, but slightly higher, to those Canada agreed to in the never-ratified Trans-Pacific Partnership (TPP), giving the U.S. tariff-free access to 3.6%, up from 3.25% under TPP, of the $15.2 billion (as of 2016) Canadian dairy market.[12][13] Canada agreed to eliminate Class 7 pricing provisions on certain dairy products, while Canada's domestic supply management system remains in place.[14] Canada agreed to raise the duty-free limit on purchases from the U.S. to $150 from the previous $20 level, allowing Canadian consumers to have greater duty-free access to the U.S market.[15]

Cars or trucks with at least 75% of their components made in the United States, Mexico, or Canada can be sold with zero tariffs. As this is an increase from the current requirement of 62.5%, the deal is intended to incentivize the production of cars in North America. Also, 30% of the work done on these cars must be done by workers who earn US$16 per hour (which is not indexed to inflation) starting in 2020. The percentage increases to 40% by 2023.[16]

Additionally, there is a stipulation that the agreement itself must be reviewed by the three nations every six years, with a 16-year sunset clause. The agreement can be extended for additional 16-year terms during the six-year reviews.[16]

The USMCA will extend the copyright length in Canada to life plus 70 years, and 75 years for sound recordings.[17]

The USMCA will impact how member countries negotiate future free trade deals. Article 32.10 requires USMCA countries to notify USMCA members three months in advance if they intend to begin free trade negotiations with non-market economies. Article 32.10 permits USMCA countries the ability to review any new free trade deals members agree to going forward. Article 32.10 is widely speculated to be targeting China in intent.[18]

A new addition in the USMCA is the inclusion of Chapter 33 which covers Macroeconomic Policies and Exchange Rate Matters. This is considered significant because it could set a precedent for future trade agreements.[19]

Signature and Ratification

USMCA signing ceremony at the 2018 G20 Buenos Aires summit on November 30, 2018.

A date for signature has not been announced. After signature, each country will have to apply its domestic procedures before ratification can take place. The agreement takes effect after ratification. (singed at the G-20 Summit in Buenos Aires, Argentina on Nov 30, 2018 by all three countries)

There is growing concern[according to whom?] about whether the current USMCA will be ratified. Mexico has stated they will not sign the USMCA if steel and aluminum tariffs remain.[20] Following the results of the 2018 U.S. Midterms, there is some speculation the Democrats' control of the house could impact the ability to pass the current USMCA agreement.[21][22] The next chair of the United States House Committee on Ways and Means Bill Pascrell argues there will need to be changes for the USMCA to pass Congress.[23] Republicans are not entirely in support of current provisions requiring labour rights for LGBTQ and pregnant workers in the USMCA and are urging Trump to not sign the deal in the current form.[24] The Canadian government has additionally expressed concern the USMCA agreement has changed and is no longer under the terms they agreed to.[25] A statement by Carlos Manuel Urzúa Macías, the incoming Mexican Secretary of Finance and Public Credit, in late November 2018 implied that the deal could be signed at the 2018 G20 Buenos Aires summit.[26]

See also

References

  1. ^ "T-MEC es el nombre con el que se conocerá al nuevo acuerdo comercial". El Universal (in Spanish). 17 October 2018. Retrieved 19 October 2018.
  2. ^ "AMLO gana y se queda T-MEC como nombre para acuerdo comercial trilateral". El Financiero (in Spanish). Retrieved 19 October 2018.
  3. ^ "L'Accord Canada–États-Unis–Mexique (ACEUM)". Gouvernement du Canada (in French). Retrieved 30 November 2018.
  4. ^ McGregor, Janyce (October 4, 2018). "Auto industry relieved by NAFTA 2.0, but results may be mixed". Canadian Broadcasting Corporation. Retrieved October 7, 2018. There would be no "Carmageddon" caused by auto tariffs torpedoing cross-border trade, now that NAFTA 2.0 had found a safe landing zone.
  5. ^ Brune, Michael (October 2, 2018). "NAFTA 2.0 remains hazardous to our health". USA Today. Retrieved October 8, 2018. {{cite news}}: Cite has empty unknown parameter: |dead-url= (help)
  6. ^ "What's in a Name Change? For Those Saying U.S.M.C.A., a Mouthful". Retrieved 8 October 2018.
  7. ^ Dangerfield, Katie (2018-08-30). "NAFTA deal reached: Canada, U.S., Mexico reach trade agreement under new name". Global News. Retrieved 2018-10-01.
  8. ^ Wattles, Jackie; Lobosco, Katie (2018-09-01). "Trump again threatens to leave Canada out of new NAFTA deal". CNN. Retrieved 2018-10-03.
  9. ^ Stephenson, Emily; Becker, Amanda (2016-06-28). "Trump vows to reopen, or toss, NAFTA pact with Canada and Mexico". Reuters. Retrieved 2018-10-02.
  10. ^ Pace, Julie; Colvin, Jill (2017-06-01). "President Trump pulls U.S. out of Paris climate accord, sparking global criticism". PBS News Hour. Retrieved 2018-10-02.
  11. ^ a b Diamond, Jeremy; Liptak, Kevin; Newton, Paula; Borak, Donna (2018-10-01). "US and Canada reach deal on NAFTA after talks go down to the wire". CNN. Retrieved 2018-10-03.
  12. ^ Dale, Daniel; MacCharles, Tonda (2018-09-30). "Canada, U.S. reach new NAFTA deal". Toronto Star. Retrieved 2018-10-01.
  13. ^ "Canada's Dairy Industry at a Glance". Canadian Dairy Information Centre. Agriculture and Agri-Food Canada. 2018-03-26. Retrieved 2018-10-01.
  14. ^ Blanchfield, Mike (2018-10-01). "Trump approves of new continental trade deal as winners and losers are assessed". The Canadian Press. Times Colonist. Retrieved 2018-10-01.
  15. ^ Evans, Pete (2018-10-01). "New free trade deal with U.S. will see Canada's duty-free limit raised to $150 from $20". CBC News. Retrieved 2018-10-02.
  16. ^ a b "Analysis | U.S., Canada and Mexico just reached a sweeping new NAFTA deal. Here's what's in it". Washington Post. Retrieved 2018-10-05.
  17. ^ "How the Canadian Music Biz Is Reacting to New Trade Deal With U.S., Mexico". Billboard. October 4, 2018. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
  18. ^ "Nafta's China Clause Is Latest Blow to Trudeau's Asia Ambitions". www.bloomberg.com.
  19. ^ "USMCA Currency Provisions Set a New Precedent". www.csis.org.
  20. ^ Blanchfield, Mike (26 October 2018). "No signature on USMCA if U.S. steel and aluminum tariffs stay: Mexican minister". CTVNews.
  21. ^ Salama, William Mauldin and Vivian. "Democrats' House Victory Complicates Passage of New Nafta, Trade Deals". WSJ.
  22. ^ "Trump's USMCA trade deal could be upended as Democrats vow to withhold support". Financial Post. 12 November 2018.
  23. ^ "Senior House Democrat Says Trump Must Change USMCA Trade Deal". www.bloomberg.com.
  24. ^ Press, Jordan (18 November 2018). "Republican lawmakers question protection for LGBTQ and pregnant workers in USMCA". CBC News. The Canadian Press. Retrieved 24 November 2018.
  25. ^ Ljunggren, David (8 November 2018). "'Not what we agreed to': Canada at odds with U.S. changes to text of USMCA, source says". Financial Post. Reuters. Retrieved 24 November 2018.
  26. ^ "Future Mexican minister: Trade deal could be signed at G20". National Post. Associated Press. 27 November 2018. Retrieved 27 November 2018.
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