h1

The United States- Mexico- Canada Agreement and its Key Benefits

May 9, 2019

Responses provided by the International Trade Administration’s Office of North America USMCA Team

flags

On November 30, 2018, the Trump Administration successfully negotiated an agreement with Mexico and Canada modernizing the North American Free Trade Agreement (NAFTA), now known as the United States, Mexico, Canada Agreement (USMCA)Have there been any further developments or updates since that time?

On April 18, 2019, the International Trade Commission (ITC) released its report on the USMCA’s likely impact on the U.S. economy and specific industry sectors. We welcome the ITC’s independent analysis of the USMCA.  This report is an important step forward in gaining congressional approval of the USMCA. The ITC analysis shows that USMCA will increase U.S. employment by 176,000 jobs and is projected to increase GDP by $65.2 billion (0.35 percent). The economy-wide model used by the ITC estimates the U.S. economy’s complete adjustment to the full implementation of USMCA, which is assumed to be year six after USMCA enters into force. Therefore, the estimates show the impact of the modeled provisions after the economy has responded to the changes in USMCA. We encourage you to reference page 43 of the report.  As a result of the Agreement, we will have stronger growth, more exports, more jobs, and rising higher wages – fulfilling the President’s promise to the American people. There can be no doubt that the USMCA is a big win for America’s economy.

What are some of the key provisions considered to be the most beneficial for U.S. companies?

The USMCA resulted in some significant updates to the existing NAFTA, improving market access for manufacturing and agricultural exports, as well as the inclusion of important new provisions in areas like digital trade and good regulatory practices.

  • In the automotive sector, the USMCA encourages U.S. manufacturing and regional economic growth by requiring that 75 percent of auto content be made in the United States, Mexico, and Canada. The agreement also uses trade rules to encourage higher manufacturing wages by requiring 40 to 45 percent of automotive content be made by workers earning an average base-wage of at least $16 per hour.
  • The USMCA maintains agriculture tariffs at zero, and includes strong new commitments on biotechnology and science-based Sanitary and Phytosanitary measures, establishes mutual standards for geographical indicators, and seeks to reduce trade-distorting policies.
  • Specific to dairy trade with Canada, the agreement made gains for U.S. milk products, cheese, and poultry.
  • Specific to Mexico, for the first time in a United States trade agreement, Mexico and the United States agreed to not restrict market access in Mexico for U.S. cheeses labeled with certain names.
  • Improvements were also made in customs and trade facilitation with Canada and Mexico agreeing to raise their de minimis shipment-value levels for taxes and duties on lower value shipments, allowing these shipments to enter with minimal formal entry procedures. The agreement sets a new informal shipment level of US $2,500, so that express shipments under that threshold will benefit from reduced paperwork, making low-value shipments easier, faster, and less costly to trade.
  • Canada and Mexico agreed to strong intellectual property standards including strong enforcement provisions against counterfeiting and piracy, effective protection of trade secrets, and ex officio authority for law enforcement officials to stop suspected in-transit counterfeit goods. The agreement also establishes 10 years of data protection for biologic drugs.
  • The new digital trade chapter contains the strongest disciplines on digital trade of any international trade agreement, providing a firm foundation for the expansion of trade and investment in innovative products and services.
  • The USMCA includes a new Good Regulatory Practices chapter, the first of its kind for a U.S. trade agreement, which will help to reduce and prevent non-tariff barriers through increased transparency, evidence-based decision-making, and whole-of-government internal coordination.
  • Lastly, the USMCA includes new chapters on Labor and Environment that bring obligations into the core of the agreement and make them fully enforceable.
  • Specific to Mexico, the United States and Mexico agreed to include an Annex on Worker Representation in Collective Bargaining in Mexico, under which Mexico commits to specific legislative actions to provide for the effective recognition of the right to collective bargaining.

In the short term, what does this mean for U.S. companies who want to do business with Canada or Mexico?

  • The Trump Administration has successfully negotiated an agreement with Mexico and Canada to modernize the North America Free Trade Agreement into a 21st century, high-standard agreement.
  • The USMCA demonstrates the Administration’s unwavering commitment to strengthening the U.S. economy through ensuring freer market access, fairer trade, and a level playing field for American workers, farmers, and businesses.

Click here for more information on the USMCA or for other U.S. commercial initiatives with Canada and Mexico.