The United States-Mexico-Canada Agreement (USMCA) is designed to replace the 1993 North American Free Trade Agreement (NAFTA) that would account for new, 21st century trade concerns. A number of changes have been made between NAFTA and USMCA, and the deal would mark a new era of commerce between the three sovereign nations.
1. Mexico is the U.S.’s primary trading partner, according to Quartz. In the first half of 2019, $309 billion worth of goods crossed the border in both directions; The publication reports this accounts for 15 percent of all U.S. trade. NAFTA is attributed with increasing trade between the two countries. Canada is the United States’ second most important trading partner, with $306 billion worth of imports and exports. China and Japan are the country’s third and fourth most important trading partners, respectively.
2. USMCA will have a profound impact on the auto industry; the agreement calls for an integrated supply chain, Michigan Radio reports. This includes increasing incentives to use North American parts for cars; if 75 percent of parts are made in North America, cars in Mexico can be exempt from U.S. tariffs. USMCA also stipulates that between 40 and 50 percent of the content must be made by workers earning at least $16 an hour, the Quad City Times reports. The paper also notes the projected impact USMCA will have on the U.S. auto industry over the next five years: $34 billion in new investments, $23 billion in new purchases of U.S. auto parts each year, and upwards of 75,000 new auto industry jobs.
3. Unlike the original NAFTA, USMCA acknowledges the role the Internet has on society and attempts to regulate digital commerce between the three countries. There are now sections of USMCA devoted to intellectual property and USMCA. These provisions include ensuring data can be transferred cross-border, guaranteeing enforceable consumer protections in the digital marketplace, and continuing to provide strong patent protection for innovators.
4. In order for the Democrats to agree to USMCA, concessions needed to be made. These include ensuring factories in Mexico will be inspected and supporting new labor laws in Mexico that allow workers to unionize. There were also a number of environmental protections put in place, including safeguarding the ozone layer, marine life, and air quality, according to PBS Newshour. However, a number of leading environmentalists believe more could have been done to consider the environment in the deal.
5. It is highly likely that this version of USMCA will be enacted in the near future. While Mexico ratified the deal earlier this year, Canada and the U.S. are expected to ratify it on the same timeline. Congress still needs to approve the deal and then President Trump must sign it into law.