USMCA

when was NAFTA signed

1994

main aims of NAFTA

• Gradual elimination of all trade barriers 

• Promotion of economic competition between members  

• Increased investment opportunities 

• Generally improved co-operation between the three member states 

pros of NAFTA

• Trade between members tripled in next 14yrs 

• Manufacturing increased in the USA 

• Mexico receives increased foreign investment 

• Mexican workers receive higher wages 

cons of NAFTA

• Some Canadian companies have closed because of competition from lower cost US firms 

• US firms have moved to Mexico causing job losses 

• Mexico could be exploited because of its natural resources and less stringent pollution laws 

• Food surpluses from The USA and Canada could be affecting the agricultural economy there 

What is USMCA

The USMCA replaced the 1994 North American Free Trade Agreement (NAFTA) and is primarily an updated version of the latter, containing mainly maintained provisions from the agreement with updates and revisions in five significant areas: 

5 improvements of NAFTA in the USMCA with details

1. Auto-manufacturing: The USMCA raised the percentage of Automobile components that are manufactured within the bloc to 75% compared to 62.5% in NAFTA. Mexico also agreed to pass stricter labour laws. 

2. Agriculture: Due to President Trump imposing 25% tariffs on steel and aluminium imported from Mexico and Canada in 2018, the countries responded with retaliatory tariffs that caused the price of American steel and aluminium to rise by 11%. This and the Covid outbreak caused US agricultural exports to decrease drastically. The USMCA, however, restored NAFTA's tariff-free trade of poultry, dairy and eggs between the North American countries. It also allowed US dairy products to be sold in the Canadian Dairy market.  

3. Digital and intellectual property: NAFTA was outdated in technological terms and did not include digital supply chains or intellectual property provisions. The USMCA updated the agreement to recognise digital trade and patent and trademark protections for digital intellectual property such as music and videos. 

4. 16-year sunset clause: NAFTA did not have an expiration date. The UMSCA, on the other hand, was signed with a 16-year sunset clause. This stated that unless all three countries agreed to continue the trade deal, it would expire automatically in 16 years. It also stated that every six years, they would meet to assess the agreement and its performance, with the ability to make changes. 

5. Dispute resolution procedures: Matters regarding countervailing and anti-dumping were resolved through NAFTA. The USMCA states that such disputes are now to be heard in front of a panel of experts from the involved states and resolved within the USMCA structure instead of domestic courts.