United States-Mexico-Canada Trade Deal

January 3, 2020

 

Commonly known as NAFTA 2.0, the United States-Mexico-Canada trade deal (USMCA) was recently passed through the House with bipartisan support and is expected to pass through the Senate early next year. The bill was signed by President Trump and the executive figures of both Mexico and Canada last year and continues to require approval from the respective countries legislative bodies. The lengthy legislative procedure associated with this agreement has given Pelosi and the Democrats time to bargain and adapt the USMCA to better suit their desires, such as the removal of certain pharmaceutical protections. 

 

The major alterations that USMCA asserts on NAFTA primarily revolves around car manufacturing, Mexican labor laws environmental protections, intellectual property protections, and currency manipulation. The new legislature aims to raise the amount of car parts manufactured in North America from 62.5 percent to 75 percent. Furthermore, the agreement states that a “significant” portion (30-40 percent) of car manufacturing work must be completed by workers making 16 dollars per hour or more. Although beneficiary to American workers in the car industry, there is a potential threat that this agreement will raise motor vehicle expenses for consumers.

 

The USMCA also attempts to tackle the issue of American companies moving factories into Mexico from the US by forcing Mexico to revitalize Mexican labor laws, allowing for Mexican workers to unionize easier. The impact of doing so will likely be an overall raise in Mexican worker’s wages and therefore have American based companies keep their factories in America to avoid increased Mexican manufacturing costs.

 

Furthermore, the USMCA attempts to redefine environmental and intellectual property protection between the three involved countries. The USMCA does so in a combined 90 pages that outline new protections for patents and copyrights, increased monitoring of illegal fishing, decreased pollution output, and reinforced stipulations regarding intellectual property in technology.

 

Lastly, Trump targets currency manipulation with the USMCA through requiring Canada and Mexico to agree upon “market-determined exchange rates.” Trump claims that countries have been undervaluing their currencies to undercut US goods on the global market, and this deal aims to reduce the impact on the US economy from this practice.

 

Keith Knutsson of Integrale Advisors commented that, “The revised North American trade agreement adapts NAFTA to a backed statute that aims to patch holes in current trade legislation caused by increased dependency on evolving technologies. If executed correctly, the USMCA could stand to greatly benefit all three countries associated with it.”

 

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