Senate approves international treaty
January 26, 2020
The United States Senate approved the United States Mexico Canada Agreement (USMCA) on January 16, the final legislative hurdle before the bill goes to President Trump for signature.
What changed
Much of the content in the USMCA is the same as that contained in NAFTA, so the overall impact of the new agreement is not expected to result in dramatic changes.
However, there are six major areas of difference between the pacts.
Automobile manufacturing
In order to avoid international tariffs, NAFTA requires that 62.5 percent of a vehicle’s parts must be made in one of the three North American countries. USMCA raises that percentage to 75 percent.
It also requires that 40 – 45 percent of vehicle parts are made in countries where workers earn at least $16 an hour. This change is to encourage auto manufacturers to produce more cars and parts in the United States.
Labor regulations
USMCA has stronger labor regulations to ensure that Mexican workers have better working conditions and more rights to join a union.
Mexico has agreed to overhaul its legislative labor standards, to include adding the right for workers to be represented in collective bargaining.
Progress and status of labor standards and labor conditions will be overseen by a committee that ensures compliance with labor rights requirements.
Increased Canadian market access for U.S. dairy farmers
The new trade deal will grant more access to the Canadian market for U.S. dairy products, eggs and poultry.
In exchange, Canada will have more access to the U.S. market for its dairy products, peanuts, peanut products and a limited amount of sugar.
Digital trade
USMCA has a Digital Trade chapter that was not included in NAFTA. It provides protections for the free flow of electronically distributed products, including a prohibition of customs duties and other discriminatory charges.
It eliminates prohibitions on data storage, so companies are not required to maintain a server in the country where the data is utilized. It also limits the ability of national governments to require access to source code and other proprietary intellectual property.
Other digital protections include consumer data, like privacy, and limiting liability for internet platforms.
And, it includes requirements for the transparency of online government information.
Environmental protections
Although environmentalists have criticized the environmental provisions of USMCA as lacking, the treaty does have improvements over NAFTA.
The new pact allows for $600 million to address regional environmental issues.
NAFTA required environmental complaints to prove that the violation causes a barrier to trade. That restriction has been removed, strengthening the reporting of environmental violations.
Biologic drugs
Congress will retain control over U.S. biologic drugs, so they will be able to legislate drug prices with manufacturers.
Other key changes
USMCA also includes: An increase in De minimus values of international shipments; “Liberalization” of and protection for U.S. international financial services and banking institutions; and commitments to the transparency of international currency exchanges.
Final approvals
Mexico has signed off on the latest version of the trade agreement and Canada is in the process of approving the deal.
The pact will be known as T-MEC south of the border, the Tratado Mexico Estados Unidos Canada.
The Spanish word tratado means “treaty.” Mexico uses that term instead of “agreement” because of an important distinction in Mexican law.
In Mexico, the word “agreement” does not carry the same weight as a “treaty,” a term that places the Mexican Senate-approved pact above that country’s federal law and only beneath their Constitution in importance.
Once the three countries have approved the USMCA it will replace the 25-year-old North American Free Trade Agreement (NAFTA), the current pact between the United States, Canada and Mexico.
For more details about USMCA, visit the website of the Office of the U.S Trade Representative here.