United States-Mexico-Canada Agreement (USMC)between Now and 2025

After more than a year of negotiations, Donald Trump, the president of the United States,
and Justin Trudeau, the Canadian prime minister, finally struck a new multilateral free trade
agreement signed by the U. S, Canada and Mexico, the United States- Mexico- Canada trade
agreement, abbreviated as USMC, they signed the new agreement at an hour before the October
1 deadline to replace the North American Free Trade Agreement, or NAFTA, which was already
lasted 25 years.
The new trilateral trade agreement has won unanimous praise from the leaders of the two
countries. The Trump administration and its trade team said that the new trade agreement will
not only rebalance the trading partnership between the United States, Mexico and Canada, but
will also benefit American auto workers and farmers. Even though the new agreement retains the
most parts of NAFTA's duty-free trade among the three countries, it builds much more on the
original.
To compare USMC and NAFTA, there has some most significant changes in the new
agreement. The first change is the vehicle rules of origin, according to the article from CSIS, the
authors Jack Caporal and William Alan Reinsch claim that “USMCA will require that 75 percent
of auto content be make in North America in order for automobiles to qualify for preferential,
duty-free treatment. By comparison, NAFTA’s auto rule of origin was 62.5 percent” (CSIS,
2018). Also, about the new agreement, the need of 75 percent content, there must be 40 to 45
percent of works made by workers who earn more than 16 dollars per hour, and requirements of
wages is requested to be implemented gradually in five years. That is the requirement from U. S.
and Canada. However, this level of wages is hard to achieve in Mexican labor market, which
could lead the Trump administration to trade some new automobile producing jobs in the United
States for higher prices and lower competitive in the global automobile business. In addition, as
the changes in a new agreement, the exist supply chain and rules from NAFTA would be
disrupted. Therefore, USMC will limit automaker’s procurement of certain parts and increase the
cost of manufacturing.
The second change is market access of dairy and agricultural products. Through the
USMC, the Canada was able to export more products of sugar, dairy, and nuts to the United
States, in a same way, the United States also gets access to Canadian dairy, poultry, and egg
markets under heavily protection of Canada. The opening of a dairy market by the United States
is a domain where Trump administration did better than the deals in the Trans-Pacific
Partnership that Obama administration successfully achieved. Canada also promised to
discontinue the seven-milk program, which has drawn the anger from the American dairy
industry. This event intricate seven-milk program factitiously stimulated the Canadian cheese
and manufacturers of processed foods to use domestic concentrated milk protein instead of
foreign imported protein. However, censure from the Canadian dairy industry claimed that the
USMCA is putting the industry "in dangerous," because this activity increased the competitive c
Canadian dairy market. According to the article from USA TODAY, the author George Petras
showed the data that “Canada will ease restrictions on its dairy market and allow American
farmers to export about $560 million worth of dairy products. That’s about 3.5 percent of
Canada’s total $16 billion dairy industry” (USA TODAY, 2018). Nevertheless, the Dairy Export
Council of the United States gave lukewarm support. In addition, it could also address long-
standing Canadian market discrimination against U.S. wines and grains by the new agreement.
The next big change is dispute settlement between investors and country. The special
arbitration mechanism in the NAFTA, which permits investors to sue countries of NAFTA for
discriminatory activities. The United States and the Canada will gradually reduce the occurrence
of such activities, and the coverage of Mexican investors will be greatly reduced. The USMCA
Investor-State Dispute Resolution (ISDS) will only include investments in Mexico's oil and gas,
power generation services, telecommunications services, transportation services and
infrastructure ownership management. According to the article of Jack and William, “The paring
back of ISDS is a major win for U.S. Trade Representative Robert Lighthizer, who views it as a
means for corporations to undercut country’s sovereignty and as political risk insurance that
encourages outsourcing” (CSIS, 2018). This change will increase investment propensity of
investors.
After those three big changes, there has some other changes between USMC and
NAFTA, like on the digital trade, the sunset, the currency, and the intellectual property rights.
The digital trade of USMC is similar to the Trans-Pacific Partnership, but there has one
important change from Trans-Pacific Partnership was an entire ban on requirement of local data,
which did not give exception for financial institutions. About the sunset, the period of validity of
USMC is 16 years, it is much longer than the original agreement, the sunset clause made from
president Trump. It is better for Mexico and Canada. After the USMC comes into effect, three
countries will hold a meeting of six years to discuss renewing agreement for another period.
According to the Wikipedia, there has some detail expectation of sunset clauses, “The sunset
clauses more control in shaping the future of the USMCA in the hands of domestic governments.
However, there is concern that this can create greater uncertainty. Sectors such as automotive
manufacturing require significant investment in cross-border supply chains. Given the
dominance Of the United States consumer market, this will likely pressure firms to locate more
production in the US, with greater likelihood of increased production costs for those vehicles”
(Wikipedia, 2019). Next, about the currency in the agreement. In the past, the United States has
never had manage to add currency manipulation or monetary rules in to core of trade agreement,
this is the first time. The dispute settlement mechanism of USMC would restrain the
requirements about foreign exchange trading. The USMC extends the duration of each country's
intellectual property rights in several areas. For example, it extends the Canada’s copyright
length to 70 years and audio tape to 75 years; and extends biologics’ parent longer than the old
parent length of Canada and Mexico in the past. In addition, the article from George Petras, who
claimed that “For first time, law enforcement officials can stop suspected counterfeit or pirated
goods in any of the three countries. Harsher punishments will be added for pirated movies online
and civil/criminal penalties for satellite/cable signal theft. The pact includes a slew of new rules
for “strong and effective protection and enforcement of intellectual property rights” (USA
TODAY, 2018). Stronger rules for protecting intellectual property can encourage creators to
increase impact form their works on the entire economy.
Furthermore, the change of tariffs is also a big part of the agreement. In terms of tariffs,
the USCM follows some of the tariff provisions in the NAFTA to a certain extent and eliminates
some of the original tariffs. For instance, the United States’ tariffs on aluminum and steel from
other two countries are stay in place as the negotiation in the past. Nevertheless, the United
States set up a new automobile tariff, according to the article from George Petras, the author said
that “Mexico and Canada would be able to export up to 2.6 million passenger vehicles to the
U.S. annually without any tariffs. Exports above that amount could be subject to tariffs. Pickup
trucks built in both countries would be completely exempt from the tariffs” (USA TODAY,
2018). That would be saving a big amount of money, thereby decrease costs for automobile
manufacturers' export and decrease the prices of imported cars in vehicles market of United
States.
Since the USCM has not yet entered into force, the new agreement will make substantial
progress in the next few years compared to the NAFTA. According to the article from Eleanor
Lamb, she posted this article on the Transport Topics, she reported that “Montana Gov. Steve
Bullock facilitated a discussion on the agreement and trade with U.S., Canadian and Mexican
leaders at the National Governors Association’s winter meeting Feb. 24. Larry Kudlow, director
of the National Economic Council, stressed the Trump administration’s vision of a trade deal that
is free, fair and reciprocal. Kudlow, who previously served as associate director for economics
and planning in the Office of Management and Budget during the Reagan administration,
projected USMCA will generate up to 100,000 new jobs. He said the deal will bring $62 billion
in auto investment to the United States” (Transport Topics, 2019). Based on the above
information, it is clear to know that there has chances for negotiation and improvement on many
details of the USMC. It is a complex and big long-term project, but the impact on the three
countries and the international economy will be huge when the new agreement is implemented.
Regarding the global impact of the USMC on imports and exports of United States.
Myron Brilliant, the executive vice president of U.S. Chamber of Commerce and author of
article, Why Approving USMCA is an urgent priority, he claimed that “USMCA’s path-breaking
provisions will serve as a precedent for future trade agreements and provide benefits that will
multiply in the years ahead—but only if Congress approves USMCA. For example, USMCA
prohibits “behind the border” barriers against U.S. exports. Too often, foreign governments
deploy regulations or standards in an arbitrary way to block imports. USMCA halts this kind of
protectionism in disguise. USMCA also raises the bar with binding enforcement for all chapters.
This includes labor and the environment, which were not subject to state-to-state dispute
settlement under the NAFTA. The U.S. is beginning trade negotiations with Japan, the EU, and
potentially other countries. Approving USMCA will allow these breakthroughs to serve as a
precedent that will shape these agreements” (CNBC, 2019). In addition, the USMC is not just
keeping the trade between countries, it is also improving domestic markets to promoting growth
of economy. Myron Brilliant used examples and explained why USMC helps economy grows in
his article, “USMCA isn’t just about holding on to what you’ve got. USMCA will boost
economic growth by improving the market access guaranteed for U.S. businesses. For example,
the agreement further opens the Canadian market to U.S. agricultural exports such as dairy
products, poultry, and wine. U.S. farmers and ranchers have faced five years of declining
commodity prices, so USMCA’s improved market access is more than welcome. And make no
mistake: These are growth markets. U.S. exports to Mexico and Canada have grown more over
the past decade than sales to any other country. In each case, exports have expanded by more
than $100 billion annually. No other market comes close. In fact, Mexico and Canada accounted
for about 40% of the growth in U.S. goods exports in dollar terms over the past decade. In
particular, USMCA promises growth for America’s small and midsized exporters. Canada and
Mexico are the top two export destinations for U.S. small and medium-size enterprises, more
than 120,000 of which sell their goods and services in our two North American neighbors. When
an American small business starts exporting, it’s almost always to Canada or Mexico” (CNBC,
2019). With the implementation of the USMC, the trade between the three countries and the
domestic market will become more mature.
To sum up, the USMC will bring benefits to people, governments and businesses in all
three countries. Between now and 2025, the advantages of the USMC will gradually emerge on
many domains. Every day that the USMCA did not pass the ratification is a day that all benefits
of three countries' people are postponed. Therefore, it is inevitable that the USMC will be
passed, which is just a matter of time.
 References
From Nafta To Usmca: Key Changes on Trilateral Trade Pact. George Petras -
https://www.usatoday.com/story/news/2018/10/01/comparison-nafta-and-usmca-trade-
agreements/1487163002/
From Nafta To Usmca: What's New and What's Next? https://www.csis.org/analysis/nafta-
usmca-whats-new-and-whats-next
North American Leaders Discuss Future Of Usmca. Eleanor Lamb -
https://www.ttnews.com/articles/north-american-leaders-discuss-future-usmca
United States–mexico–canada Agreement
https://en.wikipedia.org/wiki/United_States%E2%80%93Mexico%E2%80%93Canada_Agreeme
nt#Dairy
Us Chamber Of Commerce Executive: Why Approving Usmca Is an Urgent Priority. Executive
Myron Brilliant - https://www.cnbc.com/2019/06/14/why-approving-usmca-is-an-urgent-
priority-us-chamber-of-commerce-exec.html