Analysing the US-Mexico-Canada Agreement

by Samira Salwan

USMCA is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our farmers and manufacturers, reduces trade barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world.

-Donald Trump, President of the United States


In light of the economic downfall caused by the coronavirus, a bipartisan coalition has lobbied to push back the planned implementation date of the US-Mexico-Canada Agreement (USMCA). But what is the USMCA and why should it’s implementation be pushed back?


The US-Mexico-Canada Agreement, a multilateral free trade agreement between the three North American countries, is often said to be the reformed version of the North American Free Trade Agreement (NAFTA). This new trade agreement has three provisions which are paramount in ensuring free-flowing commerce between the three nations.


The first major provision relates to the dairy and agriculture industry. This provision not only allows the U.S. to gain access to 3.6% of Canada’s dairy market completely tariff-free but also enables U.S. farmers to forgo Canadian limits on agricultural products. It is estimated that U.S-Canada agricultural trade will increase by $70 million, which amounts to a potential 12% increase in sector-specific trade. It is important to note, however, that this accounts for a minute fraction of the U.S gross domestic product.

Changing tariffs and restrictions on the automobile industry is another key aspect of the US-Mexico-Canada Agreement. A key hallmark of NAFTA was its tariff-free provision for all automobiles that had at least 62.5% of their components manufactured in the three North American countries. The USMCA has taken a more stringent approach to the tariff-free policies for automobile companies; namely, it has increased the North American manufacturing requirement to 75%.


These policies, reminiscent of protectionist tariff walls from Japan in the 70s, aim to incentivize automobile production within the borders of the North American states. Increased automobile production in those regions could lead to the creation of jobs and a rise in economic growth. The USMCA also requires that 30% of work done on produced automobiles must be completed by workers earning $16 per hour or more.


The automobile provisions call for better pay and higher employment for North American workers.


The USMCA’s rules regarding intellectual property and digital trade are perhaps the most important stipulations within the agreement. Playing to the tune of neoliberal economic policies, the US-Mexico-Canada Agreement further extends copyright periods to 70 years after the life of its creator. Digital products, such as e-books and music, are also within the confines of the trade agreement.


The USMCA prohibits all duties on digital products and internet companies can not be held liable for content generated by their users. This policy comes much to the rejoice of Silicon Valley companies however concern arises on behalf of human rights activists who worry about the hate speech implications. Additionally, the trade agreement relaxes restrictions on data protectionism, specifically relating to the in-country data storage provisions, again playing into multinational technology corporations’ best interests.


Another key difference between NAFTA and USMCA is the environment provisions made in the latter. The trade agreement sets out $600 million to combat pertinent environmental issues and it allows the better administration of environmental regulations through removing the requirement in which a violation pertaining to trade must occur for action to be taken. This aspect of the agreement has caused much pride and it has bought the political endorsement of many democrats. However, a plethora of environmental groups, such as the Sierra group, urge the North American countries to hold themselves to higher environmental standards.


In this administration, few policy achievements were as celebrated as this trade agreement and the sudden need to delay its beginning has puzzled many.


Bipartisan senators of the Senate Finance committee have called for the delay of the June 1st start date, calling the aforementioned deadline “highly aggressive.”


According to the letter of request sent to Robert Lighthizer, the senators believe that businesses currently lack the appropriate information needed to comply with the rules stipulated in the USMCA. Concerns have been raised specifically regarding the automobile industry’s ability to alter its production within the confines of the USMCA’s deadlines.


Due to the coronavirus, corporations had to take many precautionary measures and the sudden implementation of the USMCA is projected to further intensify loss in profitability.


The tolls of the economic downturn caused by the global pandemic extend far further than what anyone had originally imagined and the implementation of the USMCA is currently left hanging in the balance.


References:

1) https://www.investopedia.com/usmca-4582387

2) https://edition.cnn.com/2019/12/10/politics/nafta-us-mexico-canada-trade-deal-differences/index.html

3) https://thepoultrysite.com/news/2020/04/us-senators-urge-coronavirus-delay-to-june-1-usmca-trade-deal-start-date


  • Facebook Social Icon
  • Instagram Social Icon
  • LinkedIn
  • Twitter

Created by Yashvardhan Sharma.

©️ The Tidings Blog