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NAFTA No More: Canada joins the U.S. and Mexico in the U.S.M.C.A.
By admin October 1, 2018

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In 1994, the United States, Mexico and Canada signed the North American Free Trade Agreement, popularly known as NAFTA. The deal, meant to facilitate economic activity between the three countries, led to the phasing out of various tariffs associated with agriculture, textiles and automobiles between 1994 and 2008. Having shaped North American trade relations for the last  24 years, the agreement was highly impactful as about 25% of all U.S. imports are from Canada and Mexico and America’s continental neighbors also serve as markets for approximately 30% of U.S. exports.

For the 2016 American presidential election, Donald Trump campaigned on a platform that included a repeal of NAFTA and other “unfair” trade agreements. In August, Trump announced a new deal, the U.S.-Mexico Trade Agreement, that allowed for duty-free access to agricultural goods on both sides of the border, removed non-tariff barriers and  encouraged further agricultural trade. This bilateral deal threatened to leave Canada behind if the government did not agree to Trump’s terms. This weekend, just before the desired deadline to make the text of the treaty public, the U.S. and Canada reached an agreement.

Though the “new NAFTA” is very similar to the “old NAFTA,” there will be several changes to regional trade and economic practice if the deal is enacted: Vehicles imported duty-free to a NAFTA country need 75% North American content; two-fifths of vehicles must be produced by workers earning at least $16 an hour in order to be eligible for duty-free trade; higher labor standards; a 16-year sunset clause with renewal meetings between the parties every six years; restrictions on exchange rate manipulation; greater American access to the Canadian dairy market; and a name change to the United States-Mexico-Canada Agreement, or U.S.M.C.A.

Additional changes to intellectual property regulations, e-commerce and dispute resolution processes are expected to restore “North America as a manufacturing powerhouse,” according to Peter Navarro. Already, the Canadian dollar gained a half percent against the U.S. dollar as investors moved to purchase riskier assets in light of the new deal.

The U.S.M.C.A. is considered a milestone for the Trump administration, though prospects of congressional support for NAFTA’s new terms remain unclear as disputes over aluminum and steel tariffs remain unresolved and midterm elections loom. Despite political uncertainty in the U.S. and Mexico as President-elect López Obrador prepares to take office, all parties seem content and remain hopeful for continued partnership and economic growth.

 

Further Reading:

North America Free Trade Agreement-NAFTA

Ten Things to Know about the New NAFTA Deal

U.S. and Canada Reach Deal to Replace NAFTA

Cars, Cows and a Crisis Averted: Highlights of a New Nafta Deal

Dollar Cements Gains on Growing Rate Gap Bets


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