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Explained: The United States-Mexico-Canada Agreement (USCMA)

By: Jackson Carter

· Global Affairs

On December 19, 2019, the U.S. House of Representatives passed the U.S-Mexico-Canada (USMCA) trade deal negotiated by the leaders of the three North American countries last fall. The passing of this deal in Congress sets the stage for the deal, touted as a huge win by President Donald Trump, to officially take effect, replacing the 1994 North American Free Trade Agreement (NAFTA). Let’s take a look at the biggest reforms the deal makes, and those are found in the automotive industry, agricultural industry, and in relations with China.

The biggest reforms made by the USMCA come in the automotive industry. According to an article published by MAZARS, the USMCA deal will have the following impacts on the North American automotive industry:
- Increases the percentage of parts used in North American made cars and trucks that must be sourced from North America from 62.5% to 75%.
- Adds a requirement that 40% to 45% of a car must be produced by workers earning at least $16 per hour.
- Requires Mexico to pass laws which provide stronger union representation and protections.
The USMCA deal also impacts the agricultural industry. Following the new agreement, Canada will give U.S. farmers increased access to the Canadian dairy market, in doing so increasing the tariff-free quota of dairy imports into Canada.
The deal also aims to limit Canada and Mexico’s ability to strike independent trade deals with the Chinese. According to Agence France-Presse, “If any signatory seeks to enter into a free-trade agreement with a ‘non-market-economy’ -- read China -- the other parties will then be allowed to cancel the three-country deal and replace it with a bilateral agreement.”
In the first six years of the agreement, the US International Trade Commission released estimates stating that USMCA should raise The United States’ GDP by 0.35% and add 176,000 jobs in the United States. It is also estimated that the U.S. will increase both imports from and exports to Mexico and Canada under the agreement.
The USMCA deal also includes a sunset clause, which ends the deal after 16 years if all parties do not wish to renew the deal.

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