The North American Free Trade Agreement (NAFTA) was first implemented in 1994, creating a free trade zone between Canada, the United States, and Mexico. NAFTA aimed to boost economic growth, create more jobs, and strengthen ties between the three nations. However, after more than two decades in effect, NAFTA became a controversial issue, with some claiming that the agreement favored certain industries and led to job loss and wage stagnation in the United States. In response, President Trump took office with a pledge to renegotiate NAFTA and bring a new trade deal to the table. The result of these negotiations was the United States-Mexico-Canada Agreement (USMCA).
The USMCA was signed in November 2018, but it took over a year for it to be approved by all three countries` legislatures. In July 2020, the agreement finally entered into force, bringing significant changes to North American trade.
One of the most significant changes in the USMCA is in the rules of origin for automotive production. Under NAFTA, a car could be considered North American-made if 62.5% of its content was from the region. Under the USMCA, that percentage has been raised to 75%, which means that a higher portion of the car`s value must derive from North American materials and labor. Furthermore, the USMCA requires 40-45% of the automotive content to be made by workers earning at least $16 per hour, a measure aimed at keeping jobs in the United States, Canada, and Mexico.
Another change in the USMCA is in the agricultural sector. The agreement increases access for U.S. dairy products to the Canadian market, which was a significant point of contention in the negotiations. In exchange, Canada gained access to the U.S. peanut and sugar markets.
The USMCA also includes provisions on intellectual property, digital trade, labor standards, environmental protections, and dispute resolution. For example, the USMCA strengthens protections for intellectual property, including extending the term of copyright for creative works and requiring internet service providers to take down copyrighted material.
Overall, the USMCA aims to modernize NAFTA and bring it up to speed with the current global economic landscape. The agreement seeks to address many of the issues that arose under NAFTA, such as job loss and outsourcing, while also increasing access to new markets. The agreement`s ratification is a significant step for North American trade and represents a new chapter in the region`s economic relationship.