On July 1, 2020, the new North American Free Trade Agreement (NAFTA) officially went into effect, replacing the 26-year-old agreement. The new deal, known as the United States-Mexico-Canada Agreement (USMCA), was signed by President Donald Trump, Canadian Prime Minister Justin Trudeau, and Mexican President Enrique Peña Nieto in November 2018.
So, what exactly is in the new agreement, and how does it differ from the previous one? Let`s take a closer look.
1. Automotive Industry
One of the biggest changes in the USMCA is a new provision that requires a higher percentage of North American parts to be used in order for vehicles to be traded duty-free. Under NAFTA, the required percentage was 62.5%. However, under the USMCA, the percentage has been raised to 75%.
2. Dairy Industry
The USMCA also includes changes to the dairy industry. Canada has agreed to grant more access to U.S. dairy farmers, allowing them to be able to sell more of their products to Canadian customers. In exchange, the U.S. has agreed to eliminate a program that allowed some American dairy products to be sold to Canadian customers at lower prices.
3. Digital Trade
Another significant addition to the USMCA is a new chapter on digital trade. This chapter includes provisions that aim to protect cross-border data flows and prevent data localization requirements. Additionally, the agreement includes new rules on intellectual property protection for biologic drugs and an extension to the length of copyright protection.
4. Labor and Environment
The USMCA also includes provisions aimed at promoting labor rights and environmental protection. The agreement requires Mexico to pass new labor laws that aim to protect workers` rights to unionize and collective bargaining. Additionally, the agreement includes new measures to protect marine life and prevent overfishing.
5. Sunset Clause
The USMCA includes a sunset clause which means that the agreement will expire after 16 years unless all three countries agree to extend it. This clause is meant to provide more stability and certainty for businesses and investors.
In conclusion, the USMCA includes several significant changes compared to NAFTA. However, the overall goal of the agreement remains the same, which is to promote trade and economic growth between the United States, Mexico, and Canada. As these three countries continue to work together, it is likely that there will be further changes and updates to the agreement in the future.