A point-by-point summary of the USMCA trade deal
The United States-Mexico-Canada Agreement (USMCA) was agreed upon on September 30 after more than a year of complicated negotiations - Photo: Mexico Presidency

A point-by-point summary of the USMCA trade deal

01/12/2018
12:55
EFE
Mexico City
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Last Friday, Mexico, the United States, and Canada signed the new USMCA to replace NAFTA

Last Friday, Mexico, the United States, and Canada signed the new North American commercial agreement (USMCA), which replaced a treaty that the countries had shared for almost 25 years.

The United States-Mexico-Canada Agreement (USMCA) was agreed upon on September 30 after more than a year of complicated and openly aggressive negotiations at the request of President Donald Trump, who deemed the original agreement –known as NAFTA- as “a mess” for his country.

Today we bring you a summary of some of the most important adjustments made to the agreement:

The automotive sector

Regarding the sensitive subject of the automotive sector, which was smoothly integrated in NAFTA, the United States sought to discourage the relocation of production to countries with lower labor costs.

With the USMCA, 75% of auto parts must be manufactured in American soil (while NAFTA only required for a 62.5% of parts to be built in the U.S.), and between 40 and 45% of the vehicle must be assembled by workers making at least 16 dollars an hour.

Mexico also agreed to continue abiding by the United States’ safety standards in the automotive industry, unless Mexican regulatory institutions deem them inferior to domestic standards.

Tariff relief for vehicles

Trump threatened to invoke national security reasons to justify tariffs on hundreds of billions of cars that the United States imports from all around the world.

However, the USMCA excluded Mexico and Canada from said tariffs, though they will only be able to export a total of 2.6 million vehicles to the United States each year, as well as an unspecified amount of light trucks and tens of millions of dollars in auto parts.

Nevertheless, the agreement does not address the tariffs on steel and aluminum imports that were imposed by the United States worldwide earlier this year, and on Mexico and Canada since the month of May.

Openness for dairy products

In signing the USMCA, Canada –a country that is very protective of its milk production- agreed to open its borders a little more in this sector, which Trump considered to be crucial during the negotiations. Canada will also allow greater imports of chicken, eggs, and turkey from the United States.

Settlement of disputes

The United States sought to eliminate provisions for conflicts to be resolved through international arbitration, though it accepted the permanence of the dispute-settlement system that was already in place with NAFTA, at the request of Canada.

However, the new agreement made a few modifications to some of the most polemic powers in “the dispute-settlement system between investors and states” which, according to analysts, could allow for the invalidation of certain laws and court rulings through irresponsible arbitration.

Copyright

The new agreement modernized and enhanced copyright standards, providing a strong protection for pharmaceutical companies and the agricultural sector. Furthermore, the USMCA demands for an equal copyright treatment for writers, composers, and artists.

E-Commerce

Modernizing e-commerce, which barely existed when NAFTA was signed a quarter century ago, was a key aspect in the renegotiation. The USMCA bans custom duties for digitally distributed products, such as software, videogames, e-books, music, and films.

Pacts with China

There is a hidden provision in the USMCA that seems to have been designed to prevent Ottawa and Mexico City from seeking a better commercial agreement with Beijing.

If any of the signing parties should attempt to establish a free trade agreement with a country that does not have a “market-oriented” economy (notably China), the other parties may cancel the trilateral agreement and replace it with bilateral ones.

Diplomatic relations between the United States and China have grown more and more contentious, with Washington imposing tariffs on the Asian giant for more than 250 billion dollars, sparking a trade war that the U.S. would never admit to have started.

A 16-year contract

The commercial agreement will be valid for 16 years, though it will be revised every six years. Should the signing parties decide to renovate the agreement, it will be valid for another 16 years. If any problems should arise, all three parties will have 10 years to negotiate and resolve their differences before the agreement expires.

Labor rights

The new agreement is equipped with labor protections that, according to the United States, are the strongest negotiated thus far.

“Mexico will commit through very specific legal actions that guarantee the recognition of the right to a collective bargaining process,” stated the office of the U.S. trade representative.

The agreement also covers internationally recognized labor rights that imply the ban on imports of goods produced through forced labor while guaranteeing the protection of migrant workers.
 

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