U.S. President Donald Trump tweeted that the USMCA “will be the best and most important trade deal ever made by the USA.” U.S. House Speaker Nancy Pelosi added that “there is no question of course that this trade agreement is much better than NAFTA.”
What will be the impact of the USMCA?
The U.S. International Trade Commission estimates that the initial version of the USMCA would create 176,000 jobs after six years and increase GDP by 0.35%.
What are the differences between the USMCA and NAFTA?
Although the final version of the USMCA has not been released, there are at least five differences that have been identified so far based upon the publicized talks:
- Auto manufacturing: The USMCA requires 75% of a vehicle’s parts to be made in one of the three countries in order to be free from tariffs when moving between the three signatory countries. The USMCA also requires more vehicle parts to be made by workers earning at least $16 an hour.
- Labor laws: The USMCA provides for an interagency committee that will monitor Mexico’s labor reform implementation and compliance with labor obligations and a set of benchmarks for Mexico to meet in implementing the reforms.
- Agricultural products: The USMCA will keep tariffs at zero for most agricultural products traded between the three countries. The USMCA will open the Canadian market to U.S. dairy, poultry, and eggs, while the United States will allow more Canadian dairy, peanuts, and sugar.
- Digital technology: The USMCA includes benefits for the technology sector. The USMCA prohibits Canada and Mexico from forcing U.S. companies to store their data on in-country servers. Also, it provides that U.S. companies cannot be sued in Canada and Mexico for much of the content appearing on their platforms.
- Biologic drugs: Currently, the U.S. provides 12 years of exclusivity, Canada – 8, and Mexico – 5. A provision was removed from the USMCA that would have required the three countries to provide at least 10 years of exclusivity for biologics. The removal was negotiated by Democrats who argued it would have hamstrung Congress from being able to legislate on drug pricing issues.