Discussing the U.S.-Mexico-Canada Agreement

On November 27, 2018, SECURUS Associate Natalia Zamora attended the last North Texas District Export Council (NTDEC) meeting of the year. It was held at the U.S.-Mexico Chamber of Commerce in Dallas, Texas.

The meeting enabled the Texas business community to offer perspectives on the new United States-Mexico-Canada Agreement (USMCA). The USMCA would revise the almost 25-year-old North American Free Trade Agreement (NAFTA). Negotiations on the USMCA concluded in October 2018, but the signatory countries have not yet signed it into law.

Business representatives described the positive impact of NAFTA on increasing North American competitiveness in the global market and emphasized the importance of free trade agreements (FTAs) in helping businesses make supply chain decisions.

Participants identified the increase in the Canadian and Mexican de minimis thresholds as one of the most important features of the USMCA. Higher de minimis thresholds in Canada and Mexico could help small businesses import goods into the Canadian and Mexican markets from the U.S. free of duties.

The USMCA has maintained the original structure and many elements of NAFTA. However, some of the new provisions of the USMCA could affect key industries and the way supply chain decisions are made in the region. Some of the notable changes from NAFTA are:

• Automotive rules of origin: The USMCA would require 75% of auto content to have North American origin in order to qualify for zero tariffs, up from 62.5%.

• Labor content provisions: 40 to 45% of an automobile’s content would have to be manufactured by workers earning at least US$16 per hour by 2023.

• Labor rights: Mexico would have to pass laws guaranteeing workers’ rights to form unions and negotiate labor contracts. Mexico also would have to extend labor rights to migrant workers. All countries party to the agreement would have the right to file labor complaints in the dispute resolution system if labor violations were to harm national trade.

• Agricultural goods market access: Canada and Mexico both agreed to allow greater access to U.S. products. Canada agreed to open its dairy market to U.S. products, and Mexico agreed to allow certain cheeses to be imported from the U.S.

• Intellectual property rights: Terms of copyright would be extended to 70 years beyond the life of the author. The deal also would extend the period that pharmaceuticals could be protected from generic competition.

• Digital trade: Duties on goods such as digital music and e-books would be prohibited. Additionally, Internet companies would be protected from liability for the content created by their users.

• Dispute settlement: The USMCA would keep the state-to-state dispute settlement system intact, but in most cases it would phase out the investor-to-state dispute settlement system.

SECURUS tracks developments in NAFTA, the USMCA, and other FTAs in order to provide clients and partners with the most comprehensive and up-to-date information on the foreign trade regulations that affect them.

Author: Natalia Zamora, Natalia.Zamora@SECURUSTrade.com, November 2018