One of President Donald Trump’s signature accomplishments is the passage of the U.S.-Mexico-Canada-Agreement (USMCA), an agreement that has been widely hailed by Trump, and others on the right, as a significant improvement over the North American Free Trade Agreement (NAFTA), but how exactly is the USMCA different from NAFTA?
NAFTA was a controversial trade agreement, signed into law January 1st, 1994, by former President Bill Clinton and has been described by Trump as “perhaps the worst trade deal ever made.” The purpose of the deal was to smooth over and remove trade barriers between the U.S., Mexico, and Canada. Its success is hotly debated, with some saying that it lowered the costs of goods in the U.S., and others pointing to an estimated nearly one million manufacturing jobs that were outsourced to Mexico and elsewhere as companies took advantage of the fact that foreign workers would work for pennies on the dollar.
The USMCA maintains the spirit of NAFTA in that it is not a protectionist agreement and it succeeds in its goal of maintaining free trade between the three signee countries. However, it does differ from NAFTA in several key aspects.
New Automobile Manufacturing Standards
Under NAFTA, automobiles had to be at least 62.5 percent manufactured in North America, the USMCA raises that number substantially, mandating the at least 75 percent of the cars be made in North America. Furthermore, at least 40 percent of the car must be made by workers earning a minimum of 16 U.S. dollars.
Dairy Imports And Exports Balanced
Canada has long been highly protective of its dairy industry, limiting imports and heavily subsidizing the industry in an attempt to keep it in business. The USMCA provides American farmers tariff free access to 3.6 percent of the Canadian dairy market. Per the Washington Post this will allow American farmers to export millions of dollars of dairy products labeled as “class 7,” specifically things such as milk powder and ice cream, as well as increased sales of eggs and turkeys.
The U.S. will also allow an increased amount of Canadian dairy, peanut products, and sugar to cross the border.
Mexican Labor Unions
In an attempt to force Mexican wages to rise, the USMCA includes changes that should make it easier for Mexican workers to unionize. According to the Washington Post, the Trump administration hopes that this will force wages to rise in Mexico, making it less affordable for American manufacturing to move to Mexico. These new labor laws will be enforced by “labor attachés” based in Mexico and violations will incur penalties that currently unnamed. This is a potentially major win, as some critics have blamed Mexico’s low wages for the exodus of manufacturing jobs from America.
The USMCA says it is “inappropriate to encourage trade or investment by weakening or reducing the protection afforded in the respective environmental law.” But how does it actually back up this statement?
The agreement requires each country to maintain an environmental impact that covers, according to Norton Rose Fulbright, “issues related to protecting the ozone layer, protecting the marine environment from ship pollution, improving air quality, preventing the loss of biodiversity, preventing, detecting and controlling invasive alien species, protecting and conserving marine species as well as promoting sustainable forest management.”
All three countries have also agreed to cease subsidizing the overfishing of endangered fish species.
Drug Pricing Controls
Democrats successfully negotiated the removal of protections for biologic drugs, according to CNN. They argued that it would have hindered Congresses ability to legislate the price of drugs. Initially included int the deal was a minimum 10-year exclusivity rule on “biologics,” which would have increased Mexico’s exclusivity law by 5 years, and Canada’s by 2, as well as decreasing the U.S.’s by 2 years. Per CNN, the pharmaceutical industry was opposed to the removal of this provision.
Both Democrats and Republicans are trying to claim the passage of the deal as a landmark victory, and the USMCA ratification will certainly be a major talking point for the Trump reelection campaign. However, it remains to be seen if the changes in the deal result in any substantial gains for the U.S. worker or for American manufacturing, or if it will simply be a continuation of NAFTA.
Author: Noah Adamitis
Source: Daily Caller: How Exactly Is Trump’s USMCA Trade Deal Different From NAFTA?