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Law and Politics

NAFTA vs. USMCA

New deal or update to old?

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WHAT IT IS

  • Nov. 30, 2018: The United States-Mexico-Canada Agreement (USMCA) was signed by President Donal Trump, President Peña Nieto, and Prime Minister Justin Trudeau at the G20 Summit in Buenos Aires, Argentina. [NPR]

  • The agreement governs $1.2 trillion worth of trade and affects nearly 500 million North American consumers. [USA Today]

  • USMCA is a renaming of, or update to, NAFTA. [The New York Times]

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  • The North American Free Trade Agreement (NAFTA) was a contract signed and implemented in 1994 by Mexico, Canada, and the United States that facilitated the free movement of goods across each of the countries’ borders. [USA Today]

  • President Trump called NAFTA the "single worst trade deal ever approved." [The New York Times]

  • President Trump forced renegotiations with Mexico and Canada through imposing tariffs on Canada and threatening to cancel NAFTA entirely. [AP News]

WHY IT MATTERS

 

President Trump has called USMCA a "brand new deal." [Vox]

Yet many call USMCA "NAFTA 2.0," or the same trade deal with updates to the old deal. With the foundational components of NAFTA still in place, what is the difference between NAFTA and USMCA? [The Brookings Institute

 

WHAT'S THE SAME

Foundation

The broad foundation of NAFTA is still in place. [Vox]

 

Cars

In order to qualify for zero tariffs, NAFTA required 62.5% of auto (car) parts to be made in North America. [USA Today] This is known as the "country of origin" rule and is used in USMCA.

 

Agriculture

Countries continue to agriculture markets, including chicken, turkey, and egg.

NAFTA allowed U.S. farmers to export the equivalent of 3.25% of Canada's dairy market. [Business Insider]

 

Standards

Health, safety, and industrial standards originally outlined in NAFTA remain in USMCA. [Government of Canada]

 

Copyright

NAFTA was the first trade deal to protect intellectual property rights. [U.S. Customers and Border Protection]

 

Dispute settlement

NAFTA's dispute-settlement system remains the same. Some call this a key win for Canada. [Business Insider]

 

 

WHAT'S DIFFERENT

The name

Many political analysts believe the new acronym is simply a"rebrand" of NAFTA. [The New York Times]

 

Cars

USMCA upped the percentage of auto (car) parts required to be built North American factories to 75% (instead of 62.5%). [Vox]

 

The deal also requires North American individuals making those parts to be paid at least $16/hour. [Axios] Some believe this will result in auto jobs moving from Mexico to the United States. [USA Today]

 

Agriculture

USMCA allows greater U.S. access to the Canadian dairy market, allowing American farmers to export around $560 million worth of dairy products.

This is a 1% increase from the  NAFTA level. [Reuters]

 

Copyright

The new agreement stiffens the NAFTA intellectual property rules, and also pushes for other countries to protect 75-year copyrights on U.S. music, books, and movies. [USA Today]

This would require, for the first time, "law enforcement officials to stop suspected counterfeit or pirated goods at every phase of entering, exiting, and transiting through the territory of any Party. " [Office of the United States Trade Representative]

 

Sunset clause

NAFTA was intended to remain in place forever. The "Sunset Clause" in USMCA means the terms expire after 16-years. USMCA also needs to be reviewed every 6 years, where each country can decide to extend or reject the deal. [Business Insider]

WHERE WE ARE NOW

  • Dec. 20, 2019: Congress passed USCMA. It will be implemented on Jan. 1, 2020. [The Associated Press]

  • Jan. 29, 2020: President Trump signed USCMA into law. [Reuters]

  • It was constitutionally required to receive a majority vote of approval from both houses of Congress. [Business Insider]

  • Many economists are expecting to see no dramatic economic effects from USMCA. [The Economist]

  • USMCA could result in higher prices for consumers. [The Boston Herald]

  • Aug. 27, 2020: At the Republican National Convention, President Trump said he "ended the NAFTA nightmare." [The New York Times]

THINGS TO THINK ABOUT

  • Why does Congress need to approve a trade deal? It's because of the U.S. Constitution. Read more.

  • In your opinion, is USMCA simply a renaming of the original NAFTA?

  • Canada is referring to the deal as the Canada-United States-Mexico Agreement (CUSMA). Does the first country listed truly matter?

  • Will the three countries be able to reach a new agreement if this proposal isn’t approved by Congress?

  • This was the first trade deal agreed upon by a leader threatening tariffs. Many are worried that other countries will follow.

Key Vocabulary