On September 30, 2018, the United States, Canada, and Mexico announced a new trade agreement called the United States-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA). The agreement was a result of intense negotiations between the three countries, which began in August 2017, and marks a significant development in North American trade relations.
One of the key changes in the new agreement is the inclusion of stronger labor and environmental provisions. The USMCA requires Mexico to increase its minimum wage and strengthen collective bargaining rights, which would make it harder for Mexican companies to undercut American wages. The agreement also includes provisions aimed at reducing air, water, and ocean pollution, such as stricter rules for auto emissions and hazardous waste disposal.
Another significant change in the USMCA is the increased access for American dairy farmers to the Canadian market. Under the new agreement, Canada will eliminate its Class 7 pricing system for dairy products and provide greater access to its market for American dairy farmers. This was a longstanding point of contention between the two countries, and the new agreement represents a major win for American dairy producers.
Other notable changes in the USMCA include the modernization of the digital trade chapter, which includes provisions on data localization and cross-border data flows, and the inclusion of a sunset clause, which means that the agreement will expire in 16 years unless the three countries decide to extend it.
The USMCA still needs to be ratified by all three countries before it can go into effect. In the United States, the agreement will need to be approved by Congress, which could be a challenge given the current political climate. However, many business groups and trade associations have expressed support for the new agreement, and it is expected to have a positive impact on the North American economy if it is ratified.
Overall, the United States-Mexico-Canada Agreement represents a significant development in North American trade relations. The inclusion of stronger labor and environmental provisions, increased access for American dairy farmers to the Canadian market, and modernization of the digital trade chapter are just a few of the changes that could have a significant impact on the North American economy. If ratified, the new agreement could provide a framework for trade relations in the region for years to come.