Just the Facts

Five Facts on the Signing of the USMCA

By Emma Petasis
November 30, 2018 | Blog

Here are five facts on the signing of the “United States-Mexico-Canada Agreement” (USMCA).

The original NAFTA was signed by President George H.W. Bush in December 1992

Talks on NAFTA began in 1990 when President Bush and Mexican President Salinas de Gortari ordered talks to begin on a free trade deal between the two countries. The U.S. and Mexico were joined by Canada in 1991, which paved the way for three-way negotiations. The deal eliminated most tariffs on trade between the three countries and created the largest free-trade area in the world.  While NAFTA has had its critics, many of whom claim it has sent U.S. jobs down to Mexico, it has also helped to increase trade between the three countries by 390%.

On August 27th, more than a year after negotiations began to revised NAFTA , President Trump announced that the United States and Mexico had agreed to terms on a 16-year trade deal

On a call with reporters, U.S. Trade Representative Robert Lightizer outlined several key provisions of the new deal. These provisions carried over into the newest deal with Canada as well. If the deal is passed by Congress it will include several new requirements including a notable one on cars: For an automobile to qualify for tariff-free status between the two countries, 75% of its parts must be produced in the U.S. or Mexico — under the current NAFTA agreement, only about 62% of parts are required to be produced in the U.S., Mexico or Canada.  In addition, the new deal would require that 40% to 45% of auto parts in cars sold in North America be made by workers earning at least $16 USD per hour. Finally, the deal has several provisions designed to address the current deficiencies when it comes to digital commerce.

On September 31, President Trump announced the finalization of the USMCA as a result of last-minute Canadian concessions

Under the deal, Canada will give U.S. dairy farmers access to 3.5 percent of Canada’s $16bn-a-year dairy market. In turn, the U.S. agreed to keep intact the system that allows the countries to rely on an independent body to resolve disputes; this provision is known as Chapter 19. Trump’s 25 percent steel tariffs also remain intact, restrictions Trudeau has before called “insulting and unacceptable.”

Vehicles, machinery and agricultural products make up much of the goods traded between the countries

Because of this, the largest new requirements in the USMCA affected these industries the most. The trade deal that Mexico and the U.S. had previously agreed to now contains the updated arrangements that Canada required. As a protection for their car industry, Canada and Mexico have a quota of 2.6 million cars they can export to the US if the US imposes a 25% global tariff on car imports. Canada also secured protection from U.S. anti-dumping tariffs through the preservation of a dispute-settlement mechanism.

On Friday morning the leaders of the U.S., Mexico, and Canada came together to sign the United States-Mexico-Canada Agreement

The signing took place in Buenos Aires, Argentina where world leaders are gathered for the Group of 20 summit. While the signing was a significant achievement for the three countries, which have been locked in tense negotiations over the past year, several issues still remain unresolved, especially between the U.S. and Canada.  In remarks following the signing Canadian Prime Minister urged President Trump to “to remove the steel and aluminum tariffs between our countries.” However, despite the presidential signing, the deal still faces a significant roadblock: the U.S. Congress.  It remains unclear whether House Democrats, who will be in the majority when the deal is voted on next year, will provide the necessary support to make the bill law.     

Join us

Stay up to date.

  • This field is for validation purposes and should be left unchanged.