On Wednesday, Mexico turned out to be the first country to approve the trade deal to substitute NAFTA, identified as the United States-Mexico-Canada Agreement, or USMCA.
President Donald Trump will meet Thursday with Canadian Prime Minister Justin Trudeau to converse the position of the USMCA. Trudeau is expected to win consent from his Parliament, but he doesn’t want to move too far ahead of the US. Right now, Trump wants the backing of House Democrats, who still have some oppositions to the deal.
The USMCA is basically NAFTA 2.0, with a few apprises. The deal has been tweaked to comprise changes for automakers, stricter labor and ecological standards, intellectual property protections, and digital trade necessities.
Here are the main changes:
Country of origin rules: Vehicles must have 75 percent of their machineries factory-made in Mexico, the US, or Canada to meet the requirements for zero tariffs (up from 62.5 percent under NAFTA).
Labor provisions: 40 to 45 percent of vehicle parts must be made by employees who make at least $16 an hour by 2023. Mexico approved new labor laws to give better protections to workforces. Democrats still want harder enforcement, though.
Intellectual property and digital business: The deal spreads the terms of exclusive rights to 70 years beyond the life of the author (up from 50). It also spreads the period that a medicinal drug can be protected from generic rivalry and comprises new supplies to deal with the digital budget, such as eliminating duties on things like music and e-books, and safeties for internet companies so they’re not responsible for content their users produce.
Sunset clause: The contract adds a 16-year “sunset” clause — meaning the terms of the agreement pass on, or “sunset” after 16 years. The contract is also focus to a review every six years, at which point the US, Mexico, and Canada can choose to extend the USMCA.
The USMCA is signed. Now it needs to be official permission.
Trump, Trudeau, and Mexico’s then-President Enrique Peña Nieto signed the agreement in November, but it still needs to be approved by all three governments.
In May, the Trump management struck a deal to end steel and aluminum tariffs on Canada and Mexico, somewhat both countries wanted if they were to pass the USMCA. That cleared a main obstacle to ratification in both nations. Trump nearly disrupted this by threatening tariffs on Mexico over migration — but the management backed down, and Mexico has now overwhelmingly accepted the USMCA.
Canada is also moving to approve the contract. But the US Congress hasn’t taken up the USMCA, and Democrats are looking for harder labor and ecological enforcement provisions. Trump’s top trade official and House Democrats both think they can reach a consent — but that hasn’t occurred yet.