USMCA

PRE-VIEWING

1. Why was NAFTA created?
2. When did USMCA replace NAFTA?
3. What impact does the replacement produce?

WHILE-VIEWING

While watching, pay attention to the following words and expressions in context. Use them in your answers to the questions below and discussion.

• competitiveness
• subsidies
• retrain people
• labour dislocation
• revision process
• structural drivers of migration
• economic opportunities
• human security
• resilience of institutions
• enhance rule of law

AFTER-VIEWING

1. What are the benefits of the USMCA?
2. What criticism does the agreement face?
3. What are the prospects for the USMCA?
4. What strategies are used to confront changes?
5. How is the asymmetry of the regions resolved?

What Is the USMCA?

HIGHLIGHTS

• read the passage
• focus on key terms
• summarize the information
• elaborate on the concepts:

1. The Background of NAFTA and its Impact on Member-States
2. The Key Differences between the USMCA and NAFTA
3. Important Provisions of the USMCA
4. Trade Rules and Regulations of the USMCA

KEY TERMS 

constitute	to compose, form, establish, create
attribute	a quality or property believed to belong to a person or thing
multidimensional	having or involving or marked by several aspects
convergence	state, quality, act of developing and merging toward a common result
approach	address a problem, task applying different methods, strategies, techniques
hamper	to get in the way of; interfere with, hinder, impede
impetus	a moving force, impulse, stimulus
cohesion	the act or state of uniting, being consistent and connected
ensue	to follow in order; come directly afterward
disparate	distinct in kind; essentially different; dissimilar

What is the USMCA?

The United States-Mexico-Canada Agreement, also known as the USMCA, is a trade deal between the three nations which was signed on November 30, 2018. The USMCA replaced the North American Free Trade Agreement (NAFTA), which had been in effect since January of 1994. Under the terms of NAFTA, tariffs on many goods passing between North America’s three major economic powers were gradually phased out. By 2008, tariffs on various agricultural and textiles products, automobiles, and other goods were reduced or eliminated.

Key Points

• The United States-Mexico-Canada Agreement (USMCA) is a free trade agreement between those three countries.
• The USMCA replaced the North American Free Trade Agreement (NAFTA).
• The USMCA took effect on July 1, 2020.
• If not renewed, the USMCA will expire in 16 years.

The USMCA was negotiated under the Trump Administration, but the idea of a replacement for NAFTA dates back before President Trump’s presidential term. Over the years, NAFTA had frequently been blamed for the export of U.S. manufacturing to Mexico and the accompanying loss of jobs and suppression of wages among U.S. workers. In 2008, then-presidential candidate Obama had pledged to renegotiate NAFTA in the interests of American workers but later declined to do so during his administration.

As a candidate in the 2016 election, President Trump campaigned on renegotiating NAFTA in order to try and get more favorable terms for the U.S. The USMCA began to officially take shape when the Trump administration sent the required 90-day notice to Congress that he was going to begin talks to renegotiate NAFTA. The talks officially began on August 16, 2017 and ended on September 30, 2018.

First, the Mexican Senate ratified the deal on June 19, 2019, and approved amendments to it on December 12, 2019. Then, on December 19, 2019, the U.S. House of Representatives passed legislation to approve the USMCA. The legislation passed the Senate in January 16, 2020, and on January 29, President Trump signed it into law.4 Finally, the Canadian Parliament ratified the treaty on March 13, 2020.

Several difficulties emerged before and shortly after the treaty went into effect on July 1, 2020. First, on May 31, 2019, President Trump said starting June 10, the U.S. will impose a 5% tariff on all Mexican imports. He threatened this increase in tariffs unless the Mexican government took sterner measures to lower the number of Central American asylum seekers entering the U.S. from Mexico. A deal was reached to avoid the tariffs on June 8, 2020. On August 6, 2020, President Trump announced he would reinstate tariffs on Canadian aluminum, which had originally been put in place in 2018. The Canadian government responded, saying it was planning to place equal tariffs on U.S. aluminum products. On October 27, the same day the Canadian government was expected to unveil its retaliatory trade measures, President Trump suspended the tariffs, retroactive through September 1. However, the office of the U.S. Trade Representative said that the U.S. may reinstate the tariffs if aluminum imports from Canada «exceed 105 percent of the expected volume in any month».

Important Provisions of the USMCA

Per the Office of the United States Trade Representative, the USMCA is a «mutually beneficial win for North American workers, farmers, ranchers, and businesses.» NAFTA aimed to create a free trade zone between the U.S., Canada, and Mexico, and the USMCA utilizes NAFTA as a basis for a new agreement. While the USMCA has a broad impact on trade of all kinds between the three named nations, some of the agreement’s most important provisions include the following:

1. Dairy and Agriculture
   The USMCA will increase U.S. farmers’ access to the Canadian dairy market by raising the amount of U.S. goods that can be exported to Canada tariff-free. This will allow the U.S. tariff-free access to up to 3.6% of the Canadian dairy market. The amount of tariff-free exports allowed for some poultry products will also be expanded.
2. Automobiles
   One of the most significant portions of the USMCA stipulates new trade regulations for automobiles and automotive parts. Under NAFTA, cars and trucks with at least 62.5% of their components manufactured in one of the three participating countries could be sold free of tariffs. The USMCA increases that minimum requirement to 75%. At the same time, the USMCA stipulates minimum wages for workers in the automotive manufacturing process: 40-45% of the work done on eligible vehicles must be accomplished by workers earning at least $16 (USD) per hour.
3. Intellectual Property
   The USMCA increases intellectual property protections. Among other changes to trade policy, the new agreement extends the copyright period to 70 years beyond the life of the creator, an increase of 20 years in some cases. The USMCA also addresses new products that weren’t around when NAFTA was written in the early 1990s. The USMCA prohibits tariffs on digital music, e-books, and other similar digital products. The agreement also establishes copyright safe harbor for internet companies, meaning they can’t be held liable for copyright infringements of their users if they make good faith efforts to stop infringement.
4. Sunset Provision
   Unlike NAFTA, the USMCA is set to expire after 16 years unless it is renewed. All three nations are required to come together for a joint review every 6 years. The agreement is not automatically terminated if one party refuses to renew it at one of these joint reviews. Instead, the nations are required to meet every year for the following 10 years to resolve the issues blocking renewal. The agreement expires if no agreement is reached in those 10 years.
5. Labor
   The USMCA sets up an independent investigatory panel that can investigate factories accused of violating workers’ rights, and stop shipments from factories found to be in violation of labor laws. In addition, Mexico says it will enact a wide array of labor reforms to make it easier for workers to unionize, and stop violence and other abuses of workers. These provisions are meant to achieve two goals: to improving working conditions for Mexico’s workers and create a more even playing field between U.S. and Mexican factories because Mexican wages are likely to rise.

North American Free Trade Agreement (NAFTA)

Launched in 1994, NAFTA consists of Canada, Mexico, and the United States. It is the most significant economic bloc in the Americas and comparable to the EU in size (see www.nafta-sec-alena.org). NAFTA’s passage was smoothed by the existence, since the 1960s, of the maquiladora program under which U.S. firms located factories in northern Mexico to access low-cost labor and avoid tariffs.

What has NAFTA accomplished for its members? Initially, the accord increased market access between Canada, Mexico, and the United States. It eliminated tariffs and most nontariff barriers for products and services traded in the bloc and made it possible for member–country firms to bid for government contracts in all three countries. NAFTA also established trade rules and uniform customs procedures and regulations. The members agreed to rules for investment and intellectual property rights. NAFTA also provides for dispute settlement in such areas as investment, unfair pricing, labor issues, and the environment.

Since the bloc’s inception, Canada and Mexico have become the most important export markets of the United States, accounting for about one-third of U.S. exports. In the three-year period through 2012, the largest increase in U.S. export growth stemmed from exports to Canada and Mexico. In the 1980s, Mexico’s tariffs averaged 100 percent and gradually decreased over time, eventually disappearing under NAFTA. Annual NAFTA foreign investment in Mexico rose dramatically as U.S. and Canadian firms invested in their southern neighbor. Following NAFTA’s passage, Mexico’s per-capita income has risen substantially. Mexico is now Latin America’s wealthiest country in per-capita income terms.

Other economic blocs are found worldwide. They include:

The European Free Trade Association, which includes Iceland, Liechtenstein, Norway, and Switzerland. It is linked to the European Union. It has free trade agreements with many countries worldwide.

MERCOSUR, or the El Mercado Comun del Sur (the Southern Common Market), the strongest bloc in South America, established in 1991 (see www.mercosur.int).

The Association of Southeast Asian Nations (ASEAN), created in 1967 with the goal of maintaining political stability and promoting regional economic and social development among its members (see www.aseansec.org).

Asia Pacific Economic Cooperation (APEC), which aims for greater free trade and economic integration of the Pacific Rim countries. It incorporates 21 nations on both sides of the Pacific, including Australia, Canada, Chile, China, Japan, Mexico, Russia, and the United States (see www.apec.org).

The Australia and New Zealand Closer Economic Relations Agreement (CER), founded in 1983, which promotes free trade between the two nations.

The Gulf Cooperation Council (GCC; see www.gcc-sg.org/eng), which aims to coordinate economic, social, and cultural affairs among its members: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

KEY TAKEAWAYS

KEY TERMS

MATCH THE TERM WITH ITS DEFINITION

term	to bring to an end, dismiss
approve amendment	a breaking of a law
pass legislation	to apply by authority; force the acceptance of
ratify	an act of interfering with someone’s rights
impose	a clause in a legal instrument, a law, etc., providing for a particular matter
provision	to introduce (something) as a basic part
infringement	to bring in a new law by voting in parliament or by decree
terminate	condition
violation	to confirm by expressing consent, approval, or formal sanction
incorporate	to confirm formally, accept an alteration of or addition to a bill, constitution, etc.

RESTORE THE SENTENCE BY FILLING IN THE KEY TERM

1. As a candidate in the 2016 election, President Trump campaigned on renegotiating NAFTA in order to try and get more favorable ………… for the U.S.

2. First, the Mexican Senate ratified the deal on June 19, 2019, and ………… to it on December 12, 2019.

3. Then, on December 19, 2019, the U.S. House of Representatives ………… to approve the USMCA. The legislation passed the Senate in January 16, 2020, and on January 29, President Trump signed it into law.

4. Finally, the Canadian Parliament ………… the treaty on March 13, 2020.

5. Several difficulties emerged before and shortly after the treaty went into effect on July 1, 2020. First, on May 31, 2019, President Trump said starting June 10, the U.S. will ………… a 5% tariff on all Mexican imports.

6. While the USMCA has a broad impact on trade of all kinds between the three named nations, some of the agreement’s most important ………… include the following…

7. The agreement also establishes copyright safe harbor for internet companies, meaning they can’t be held liable for copyright infringements of their users if they make good faith efforts to stop ………….

8. The agreement is not automatically ………… if one party refuses to renew it at one of these joint reviews.

9. The USMCA sets up an independent investigatory panel that can investigate factories accused of violating workers’ rights, and stop shipments from factories found to be in ………… of labor laws.

10. Asia Pacific Economic Cooperation (APEC) ………… 21 nations on both sides of the Pacific, including Australia, Canada, Chile, China, Japan, Mexico, Russia, and the United States.

COMPLETE THE PASSAGE WITH THE WORDS FROM THE BOX

highlights  substituted field ensuring  reciprocal modernizing  force mutually supporting  manipulation

The United States-Mexico-Canada Agreement (USMCA) entered into 1) …………….. on July 1, 2020. The USMCA, which 2) …………….. the North America Free Trade Agreement (NAFTA) is a 3) …………….. beneficial win for North American workers, farmers, ranchers, and businesses. The Agreement creates more balanced, 4) …………….. trade supporting high-paying jobs for Americans and grow the North American economy.

Agreement 5) …………….. include:

•   Creating a more level playing 6) …………….. for American workers, including improved rules of origin for automobiles, trucks, other products, and disciplines on currency 7) …………….. .

•  Benefiting American farmers, ranchers, and agribusinesses by 8) …………….. and strengthening food and agriculture trade in North America.

•   9) …………….. a 21st Century economy through new protections for U.S. intellectual property, and ensuring opportunities for trade in U.S. services.•   New chapters covering Digital Trade, Anticorruption, and Good Regulatory Practices, as well as a chapter devoted to 10) …………….. that Small and Medium Sized Enterprises benefit from the Agreement.

MIXED BAG

One-Year Anniversary of the United States-Mexico-Canada Agreement Trilateral Joint Statement

July 07, 2021

Today, Mexico’s Secretary of Economy Tatiana Clouthier, United States Trade Representative Katherine Tai, and Canadian Minister of Small Business, Export Promotion, and International Trade Mary Ng met in-person, for the first time, to mark 1) a /the one-year anniversary of the entry into force of the United States-Mexico-Canada Agreement (USMCA). With this meeting, Mexico, the United States, and Canada reaffirmed their commitment 2) to/ for North American supply chains and economic competitiveness, which have created significant economic growth and benefits for people and workers in all three countries. 3) X/ The USMCA has strengthened the 4) region/ region’s competitiveness and reinforced it as the world’s most dynamic 5) economic/ economical 6) block/ bloc. 

The entry into force of the Agreement on July 1, 2020 opened a new era in 7) the/ x North American trade and economic relations. The re-negotiation of the North American Free Trade Agreement updated our trilateral partnership by modernizing and strengthening our rulebook to ensure that our economies and the region remain competitive, 8) exclusive/ inclusive, and 9) sustained/ sustainable. The USMCA has also equipped the three Parties with resources to enhance resiliency in the face of 10) x/ the COVID-19 pandemic, setting our economies firmly on the path to growth and recovery.