Opinion: Despite only a few changes, USMCA may be more effective than NAFTA
The days of the North American Free Trade Agreement (NAFTA) are over — or are they?
Officially, NAFTA has met its end, and a newly-signed trade agreement is waiting for ratification in the U.S., Mexico and Canada.
The United States-Mexico-Canada Agreement (USMCA) was supposedly negotiated to allow for a better trade agreement between the North American countries. The new agreement, however, looks eerily similar to
NAFTA with only a few changes.
According to The Balance, the bill makes changes by listing new auto manufacturing regulations, opening the Canadian dairy markets to U.S. farmers, regulating Mexican trucks crossing the U.S. border, creating more protection for patents and trademarks, reducing the competition for U.S. drug companies in Canada and restricting companies who file for Chapter 11 bankruptcy.
A few key details stand out in this new trade deal.
Vox reports that the new auto manufacturing guidelines would change the qualifications for zero tariffs. Under USMCA, automobiles need 75 percent of their components made in the U.S., Canada or Mexico to qualify as opposed to the 62.5 percent under NAFTA. This could pose a threat to the auto industry, as many parts are made overseas and shipped into one of the three countries and could complicate the process.
CNBC wrote that Trump agreed to lift the steep tariffs on steel and aluminum coming into the U.S. from Canada and Mexico. This lift from the 25 percent steel tariff and 10 percent aluminum tariff aided in the “de-escalation in tensions with Canada and Mexico.” This should also help with the ratification of the USMCA in both the other countries.
This deal comes at a dramatic time in the U.S.-China trade war. CNN Business Perspectives writer James D. Schultz writes that China’s reluctance to sign a deal in May led to China’s continuing downward spiral and their weakest economy in 17 years. Meanwhile, the USMCA is slated to strengthen the economies of the three nations who share it.
Another interesting part about the new trade deal is its similarity to NAFTA.
Trump claimed that NAFTA was “perhaps the worst trade deal ever made,” but USMCA is the same except for a few additions.
Confusing though the concept is, the USMCA might be able to do some good yet.
The dairy industry in the U.S. may receive a helping hand as the products are finally allowed in the Canadian markets.
The cars coming from Mexico are required to meet the same standards as the U.S. trucks and may help safety concerns surrounding the vehicles.
Mexico is allowing legislative recognition for collective bargaining, which will help the labor workers in Mexico have their own voices in wage and working conditions.
Although USMCA doesn’t differ much from NAFTA, the new additions may actually be worth the complicated negotiations and counter-offers that eventually produced the new deal. If the USMCA does what lawmakers are claiming, the economy may just see a significant boost, and the easing tensions between the three involved nations certainly is a positive side effect.
The new deal still has a way to go for ratification in the three nations, but they jumped the first hurdle of negotiations and the general atmosphere surrounding the ratification is optimistic. Whether or not the deal will work will only reveal itself with time.