The United States, Mexico, and Canada recently reached a new trade agreement to replace the 1994 North American Free Trade Agreement (NAFTA). The new agreement, called the United States Mexico Canada Agreement (USMCA), is expected to bring significant changes to trade among the three countries.
One of the main goals of the USMCA is to provide more market access for American farmers and manufacturers. The agreement requires that 75% of automotive content be made in the three countries, compared to NAFTA`s 62.5% requirement. In addition, the USMCA expands access to Canadian dairy markets for American farmers, while preserving Canada`s dispute resolution system for trade disputes.
The USMCA also includes provisions related to labor and environmental protection. The agreement requires that a certain percentage of automotive content be produced by workers earning at least $16 an hour, which is expected to help reduce outsourcing to countries with lower labor costs. The USMCA also requires Mexico to strengthen its labor laws and better protect workers` rights.
Another key change in the USMCA is the introduction of a sunset provision. The agreement will expire after 16 years, and parties must review and renew the agreement every six years. This provision is meant to prevent trade imbalances and ensure that the agreement remains relevant in a rapidly changing global economy.
While the USMCA has been signed by the three countries, it has yet to be fully ratified. Ratification requires approval from each country`s legislature, which may prove to be a challenge. In the United States, the Democratic-controlled House of Representatives has expressed concerns about labor and environmental protections in the agreement.
Overall, the USMCA represents a significant update to the 25-year-old NAFTA. The agreement is poised to bring significant changes to trade and labor relations among the three countries and is expected to be a major focus of trade policy in the coming years.