The last week of September brought the United States and Canada face-to-face during NAFTA renegotiations. The U.S. imposed a deadline of September 30 for Canada to agree to the terms of the revised NAFTA deal. Initially, Canada argued that it would rather not sign a deal at all than sign a bad one. In response, President Trump announced that he would advance with the renewed deal with or without Canada by signing an agreement with Mexico on August 29.

September 30 brought an end to all the speculation when U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Christian Freeland issued a joint statement declaring that an agreement was reached with Canada and Mexico on a new and modernized trade agreement for the 21st century: the United States-Mexico-Canada Agreement (USMCA). The joint statement also announced that USMCA will give its workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade, and robust economic growth throughout the region. 

 

What does the new agreement offer?

USMCA is valid for sixteen years, after which it will lapse unless the member nations renew it. With a total of 34 chapters- as opposed to NAFTA’s 22 chapters-the revised agreement covers a wide range of topics, such as labor, environment, small and medium enterprises, market competition, anti-corruption, regulatory practices, and dispute settlement, among others.

The new agreement would provide U.S. exporters greater access to the Canadian dairy markets. After much contention, Canada agreed to eliminate a program that incentivized consumers to buy domestic dairy, in favor of a tariff cut for U.S. dairy imports.

The chapter on the dispute resolution process of the original NAFTA, which the U.S. sought to eliminate, will remain in place. Under this chapter, any member nation may challenge the imposition of tariffs or other actions in front of a panel representing all the member countries.

To limit tariffs on automobiles, the new accord requires the manufacturer to produce automobiles with 75% of its content – higher than the 62.5% that was standard in NAFTA. This clause should reduce the import of automobile parts from the manufacturing hubs such as China, Japan, South Korea, and Germany.

The new agreement also provides relief to Mexican and Canadian auto exporters. The agreement specifies that, should the U.S. impose a measure pursuant to section 232 of the Trade Expansion Act of 1962, it shall exclude the following: For Canada: (1) 2,600,000 passenger vehicles imported on an annual basis (2) light trucks imported; and (3) such quantity of auto parts amounting to 32.4 billion U.S. dollars in declared customs value in any calendar year. For Mexico: (1) 2,600,000 passenger vehicles imported on an annual basis (2) light trucks imported; and (3) such quantity of auto parts amounting to 108 billion U.S. dollars in declared customs value in any calendar year.

USMCA was finalized at the eleventh hour and promises a win-win situation for the U.S., Canada, and Mexico. This new accord works toward a better trade integration for these North American nations.   

To learn more about USMCA, visit The New York Times.