The new free trade agreement between the United States, Mexico, and Canada came into force on July 1 to replace the North American Free Trade Agreement (NAFTA). The leaders are meeting on Wednesday, July 8, to celebrate this new phase. 

President Donald Trump will receive his Mexican President Andrés Manuel López Obrador, at the White House to celebrate the new tripartite trade agreement the USMCA. Canadian Prime Minister Justin Trudeau will not attend the event. 

The North American Free Trade Agreement (NAFTA), was in force for 25 years. This is a great achievement for President Trump as it has been one of the biggest promises during his presidential campaign. In his remarks commemorating the agreement’s entry into force, he said,

“When I ran for president, I made a solemn promise to the American people that I would end the job-killing failure called the North American Free Trade Agreement (NAFTA) and replace it with a better deal for our workers, farmers, ranchers, and businesses—the men and women of Main Street who built the most prosperous and equitable economy in human history. … Today, with NAFTA ending forever and the United States-Mexico-Canada Agreement (USMCA) entering into full force, our grateful nation pays tribute to America’s workers and celebrates their ability to overcome decades of bad deals and failed policies.

The USMCA is the largest, fairest, and most balanced trade agreement ever negotiated and contains innovative provisions to help grow the economy and support American jobs.  It is a tremendous victory for our manufacturers and autoworkers, meaning more cars and trucks will be produced in the United States.  The USMCA is also a historic breakthrough for American agriculture.  Canada will provide greater access for American dairy products, poultry, and eggs, and finally give fair treatment to American-grown wheat.  In addition, the USMCA includes groundbreaking provisions to address digital trade, services, small business, and more, which will protect America’s competitive edge in technology and innovation.”

The agreement was ratified in January 2020, after achieving Senate approval with a strong bipartisan support vote of 89-10.

The final version of the revised agreement included some updates demanded by the Democrats calling for stricter enforcement of labor provisions, environmental protections, and other changes. 

Mexico was the first to ratify the agreement in June 2019, and Canada did so in March of this year. 

Key points of the USMCA (United States Mexico Canada Agreement):

  • Manufacturing origin: cars must have 75% of their components manufactured in Mexico, the U.S. or Canada to qualify for zero tariffs (compared to the 62.5% required by NAFTA).
  • Labor provisions: 40-45% of automotive parts must be manufactured by workers earning at least $16 per hour by 2023. Mexico agreed to pass new labor laws to provide greater protections for workers, including immigrants and women. 
  • Access to the Canadian Dairy Market: The United States succeeded in getting Canada to open its dairy market to American farmers.
  • Intellectual Property and Digital Trade: The agreement extends the terms of copyright to 70 years beyond the life of the author. It also includes new provisions to deal with the digital economy, such as prohibiting rights on things like music and e-books, and protections for Internet companies from being responsible for the content their users produce.
  • Sunset clause: The agreement adds a 16-year sunset clause, meaning that the terms of the agreement expire after 16 years. The treaty is also subject to a review every six years, at which time the United States, Mexico and Canada may decide to extend the USMCA.

This new treaty seeks to create a regional economic unit, with clear rules, reduced tariffs in the exchange between the three parties, and stable employment conditions, especially in the manufacturing industry, and to strengthen and enhance the region’s economy in the face of the new global economic scenario.