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USMCA Agreement

USMCA Agreement

USMCA is the acronym in English for the new agreement between the United States, Canada and Mexico that comes to replace the NAFTA, in Mexico it was recognized T-MEC as an official name. The agreement was signed on November 30th 2018, but it needs to be ratified by all three Congress.

NAFTA, was the previous name of the deal, it was created in 1994 and has been updated with new agreements. The negotiations took more than 12 months. In the past, NAFTA emerged as a measure to compete with the economic growth that Asia was taking at that time.

Canada opens dairy market

With the NAFTA, Canada delimited how much milk, cheese and among other dairy products, entered in the country from the United States. Now, US managed to enter in the county and adjustment will be made in the price.

Canada opens its doors not only to dairy products, also to poultry and eggs, in reciprocity, the United States will allow dairy products and peanuts and restricted quantities of sugar coming from Canada to enter the US. In this point the US farmers get more access to Canada market.

Renewal in the automotive industry

Canada accepts a quota of 2.6 million vehicles exported to the United States in the event that Donald Trump imposes 25% global tariffs for national security reasons.

75% of the auto parts that are sold in North America must be manufactured in these three countries so that it can be exported without tariffs. In the previous agreement, it only corresponded to 62.5%.

The United States is committed to approximately 40-45% of the total car must be manufactured by workers who earn at least US $ 16 per hour, to avoid the relocation of factories to low-cost areas in Mexico.

Validity

It was constituted with a duration of 16 years, and must be reviewed by the three countries every 6 years to evaluate the agreements. NAFTA, did not have definite validity.

Commitments and changes

The nations committed themselves to adopt labor standards and practices in accordance with the provisions of the International Labour Organization, at this point, they must enforce them.

The 3 countries will maintain the exchange rates determined by the market and will not incur the currency manipulation and exalt their commitment to fight corruption and Good Regulatory Practices, as well as a chapter devoted to ensuring that Small and Medium Sized Enterprises benefit from the Agreement.

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