The new U.S.-Mexico-Canada trade agreement announced Sept. 30, 2018 is intended to replace the North American Free Trade Agreement (NAFTA) that took effect in 1994. It still needs to be ratified by all three governments before taking effect.
Here are a few highlights:
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• Canada preserves NAFTA’s Chapter 19, an independent panel set up to resolve special trade disputes. Though it’s renumbered in the final USMCA agreement, the provision stays mostly intact. (Vox.com)
• Canada will eliminate its “Class 7” program that U.S. farmers say allowed Canada’s low-priced dairy ingredients to undersell U.S. dairy products, and will provide new access for U.S. products, including fluid milk, cream, butter, skim milk powder, cheese and other dairy products. Canada will also eliminate its tariffs on whey and margarine. (Office of the U.S. Trade Representative
• The USMCA tightened NAFTA’s already complex “rules of origin” — the requirements to qualify for the zero tariff — and mandated that even more parts be sourced from North America, even if the parts are costlier than those available elsewhere. (Washington Post) The levels rise from 62.5% to 75% — a 20% increase. (APMA)
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• The new agreement includes strong protection and enforcement of intellectual property rights, including 10 years of data protection for biologic drugs and a large scope of products eligible for protection. (Office of the U.S. Trade Representative)
• All vehicles in NAFTA will need to meet a minimum threshold of 40% being made by workers making at least $16 per hour. (Source: APMA)
• The agreement puts in a 16-year “sunset” clause — meaning the terms of the agreement expire, or “sunset,” after a set period of time. The deal is also subject to a review every six years, at which point the U.S., Mexico, and Canada can decide to extend USMCA. (Vox.com)
• Canada will be permitted to ship 2.6 million vehicles annually and $32 billion in automotive parts to the United States tariff free. (Source: APMA)
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