USMCA is Ready

Democratic speaker of the House of Representatives, Nancy Pelosi, said on December 10 that she and US President Donald Trump have agreed on a deal that would allow the ratification of the USMCA – the trade deal between the US, Canada and Mexico reached last year to replace NAFTA.

Changes to the agreement included enforcement of labour standards in Mexico, which was a major stumbling block.  Other issues included reducing market exclusivity for certain pharmaceuticals and stronger environmental protection.

Overall, the USMCA is not a major overhaul of NAFTA.  However it contains new provisions for digital trade, financial services and other aspects of trade that did not exist or were less important when NAFTA was enacted in 1994.

Key Insights

  • One of the most significant differences between NAFTA and USMCA is that the new agreement has a ‘sunset clause’.   USMCA will last for 16 years.  After six years, the three member countries will get together again to negotiate and fix any problems.  NAFTA has no sunset clause.  Members could withdraw with six months’ notice.   (Global Edge/Michigan State University)
  • The USMCA addresses e-commerce, financial services and other areas of trade that have come to prominence in recent years.  (USA Today
  • The bill includes significant changes regarding environmental protection and conservation. (Washington Post
  • Many Democrats and labour groups blamed NAFTA for a flight of production and jobs to Mexico, where wages are much lower and workers have had few organizing rights. The new bill addresses labour standards.  (LA Times)
  • A big part of the new trade agreement focuses on requiring that auto parts be made in the US, Canada and Mexico, as well as setting higher wages for the workers who make these products. (Fox Business)