The US Mexico Agreement (USMCA) is a trade agreement between the United States, Mexico, and Canada that was signed on November 30, 2018, and went into effect on July 1, 2020. The agreement replaces the North American Free Trade Agreement (NAFTA), which had been in place since 1994.
One of the most significant changes from NAFTA is that the USMCA requires that automobiles must contain a higher percentage of North American-made parts to qualify for duty-free treatment. This means that a car or truck must have 75% of its parts made in the US, Canada, or Mexico in order to be eligible for zero tariffs, up from the previous requirement of 62.5%.
Another key aspect of the USMCA is that it includes provisions for digital trade, which did not exist in NAFTA. These provisions make it easier for digital companies to do business across borders and help protect intellectual property.
The agreement also includes new labour and environmental standards. Mexico has agreed to increase its minimum wage and allow workers to form unions more easily, which should help level the playing field for workers across North America. The USMCA also includes provisions to protect wildlife, conserve marine resources, and reduce air and water pollution.
In addition, the USMCA includes measures to protect intellectual property, including new rules for the protection of biologic drugs and a requirement that internet service providers remove infringing content when notified.
Finally, the USMCA includes a sunset clause that requires the agreement to be reviewed after six years. This means that the three countries will have to renegotiate the agreement or decide whether to let it expire if they cannot come to an agreement on its renewal.
Overall, the USMCA represents a significant modernization of North American trade rules and is expected to boost trade and create jobs across the continent. As the United States, Mexico, and Canada continue to work together, this agreement will no doubt play an important role in shaping the future of North American trade.