Eyeing on the United States-Mexico-Canada Agreement (USMCA)

President Donald Trump signed the United States-Mexico-Canada Agreement (USMCA) with Mexico and Canada on 29th January 2020. The agreement is an updated version of 26-year old North American Free Trade Agreement (NAFTA) that was blamed for hollowing out the American manufacturing sector.

In the signing ceremony, President said that USMCA is estimated to add extra 1.2% to GDP and create countless new jobs opportunities for Americans. Then he added, “For the first time in American history, we have replaced a disastrous trade deal that rewarded outsourcing with a truly fair and reciprocal trade deal that will keep jobs, wealth, and growth right here in America. And, in a true sense, it’s also a partnership with Mexico and Canada and ourselves against the world.”

For, automotive industry, two most important changes have been done that are beneficial for manufacturing workers from all three countries. As per the first change, it is mandatory for automobiles to have 75% (up from 62.5% under NAFTA) of their components manufactured in Mexico, the US, or Canada to qualify for tariff-free treatment.

Second change says 40% to 45 % of automobile parts must be manufactured by workers earning minimum $16/hour. These laws are intended to boost the production in North America and aims to slow the industry’s migration to Mexico.

Considering the Agriculture, as per the agreement American farmers will get more access, about 3.5 % of Canada’s $16 billion annual domestic dairy market. Which was previously a biggest concern for Trump. This change made Canadian dairy farmers to sacrifice but PM Justin Trudeau has promised Canadians compensations.

In his statement at signing ceremony, Trudeau said, “There’s much more work to do in lowering trade barriers and in fostering growth that benefits everyone. But reaching a new free trade agreement with the United States and Mexico is a major step for our economy.”

Many companies and organizations have been seen showing support for the agreement. The press release published by Blue Diamond, an almond marketer and processor, applauded president Trump for signing the USMCA. Company’s President and CEO, Mark Jansen said, "The USMCA represents a renewal and modernization of a decades-long partnership between Canada, Mexico and the United States.” Later he added, “This agreement will stimulate additional opportunities within these markets and provide further stability for our grower-owners."

Looking at the changes made in new deal, opposition parties didn't encourage the signing but experts express that new USMCA is expected to provide stronger protections for labor and the digital economy, create valuable markets for farmers and set new rules to encourage manufacturing in the U.S., Mexico and Canada.