Home / World / NAFTA has officially disappeared. Here is what has changed and has not changed

NAFTA has officially disappeared. Here is what has changed and has not changed

The new deal was signed by Trump and his Mexican and Canadian counterparts in 2018 and approved by Congress earlier this year after Democrats added stricter workplace rules.

It was advertised by the President as a major political victory before his re-election campaign, but has since been overshadowed by the coronavirus pandemic and other crises.

Much of the USMCA simply updates the 25-year agreement it is replacing. It is expected to create 176,000 jobs after six years and increase American GDP by 0.35%, according to a report published last year – long before the pandemic – by the US International Trade Commission, a federal government agency. In comparison, the United States added over 1
52,000 jobs in January 2020 alone.
But the deal provides certainty for groups of businesses and farmers who feared that Trump would ruin NAFTA without having a new deal in place, a move he has repeatedly threatened.
The USMCA is at odds with Trump’s efforts to renegotiate trade terms with China. After more than a year of negotiations, a preliminary agreement signed in January is unable to solve the main problems with intellectual property theft and forced technology transfers. It leaves tariffs on billions of dollars of assets in place and it is unclear whether China will deliver on its promise of more than double its purchases from American farmers.
Trump has opted for bilateral agreements and signed new agreements with South Korea and Japan. It withdrew the United States from the 12-country trans-Pacific partnership, known as TPP, which was negotiated by the Obama administration.

Here are some of the key changes in USMCA:

Automatic production increase

USMCA creates a new incentive for the construction of cars and trucks in North America. It requires that 75% of the parts of a vehicle be manufactured in one of the three countries – compared to the current 62.5% rule – to remain free of tariffs when moving between the three signatory countries.

It also requires workers to earn more parts of the vehicle for at least $ 16 an hour, which can boost production in the United States, where wages are higher than in Mexico.

The report from the International Trade Commission found that these changes would add 28,000 jobs in the sector in six years, also leading to a slight increase in the price of vehicles that consumers pay. However, a Trump administration report was more positive, predicting that the deal would create 76,000 auto jobs in five years.

Labor laws have been tightened in Mexico

Manufacturing workers have long blamed NAFTA for sending jobs to Mexico, where wages are lower, and it was a priority for Democrats that the USMCA strengthen enforcement of labor rules, creating conditions equality for American workers.

Democrats have entered into an agreement with the Trump administration to strengthen the language of application of the agreement. The changes were able to gain support from AFL-CIO, the largest union federation in the United States.

The agreement provides for an interacting committee that will monitor the implementation of Mexico’s labor reform and compliance with labor obligations. In addition, for the first time in any United States trade agreement, it allows “rapid response” panels to verify whether specific structures violate workers’ rights and to impose duties or sanctions on products manufactured in those structures.

US dairy farmers gain more market access

The original NAFTA eliminated tariffs for most agricultural products marketed between the three countries. Canada and Mexico are already the two largest export markets for U.S. farmers and breeders.

The USMCA will keep these tariffs at zero, further opening up the Canadian market to U.S. dairy products, poultry and eggs. In return, the United States will allow more Canadian dairy products, peanuts and peanut products, as well as a limited amount of sugar, to cross the border.

NAFTA update for the digital age

The USMCA includes extensive benefits for the technology sector in a chapter on digital commerce that was not part of the original NAFTA. The new provisions should not directly create new jobs, but could provide a boost to US businesses in other ways.

For example, the new trade agreement prohibits Canada and Mexico from forcing US companies to store their data on national servers. It also ensures that U.S. companies cannot be sued in Canada and Mexico for much of the content that appears on their platforms.

Environmental protections

The deal provides $ 600 million to deal with environmental problems in the region – such as Tijuana’s wastewater outflows affecting San Diego – and makes enforcement easier by eliminating the requirement to demonstrate that a violation affects the business.

Although the new enforcement measures are met for most Democrats, they haven’t gone far enough to convince environmental groups like the Sierra Club to support the deal.

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