NAFTA or USMCA, it wasn't dictated by drumpf/trump, and we will have to wait and see if it is enforced any better than the original trade treaty. These from the Washington Post.....
U.S., Canada and Mexico just reached a sweeping new NAFTA deal. Here’s what’s in it.
Goodbye, NAFTA. Hello, ‘USMCA.’ The deal has a new name, new rules for cars and trucks, and labor and IP protections.
October 1 at 6:04 AM
On Sunday night, President Trump got his wish for a significantly revised North American trade deal. After more than a year of intense negotiations, the United States, Canada and Mexico reached an agreement to update the North American Free Trade Agreement, the 1994 pact that governs more than $1.2 trillion worth of trade among the three nations.
The new deal won’t go into effect right away. Most of the key provisions don’t start until 2020 because leaders from the three countries have to sign it and then Congress and the legislatures in Canada and Mexico have to approve it, a process that is expected to take months.
Here’s a rundown of what’s in the “new NAFTA.”
New name. Goodbye NAFTA. The new deal will be known as the United States-Mexico-Canada Agreement, or USMCA. Trump, who had long disdained NAFTA, had suggested that he might call it the “USMC,” in honor of the U.S. Marine Corps, but in the end, USMCA won out.
Big changes for cars. The goal of the new deal is to have more cars and truck parts made in North America. Starting in 2020, to qualify for zero tariffs, a car or truck must have 75 percent of its components manufactured in Canada, Mexico or the United States, a substantial boost from the current 62.5 percent requirement.
There’s also a new rule that a significant percentage of the work done on the car must be completed by workers earning at least $16 an hour, or about three times what the typical Mexican autoworker makes. Starting in 2020, cars and trucks should have at least 30 percent of the work on the vehicle done by workers earning $16 an hour. That gradually moves up to 40 percent for cars by 2023.
While many economists think these new rules will help some North American workers, they also warn that car prices might rise and some small cars may no longer be made in North America because they would be too expensive under the new requirements. There are also concerns that automakers might not make as many cars in North America to export to China and elsewhere overseas because costs would be higher in the USMCA region than making the vehicles in Asia.
Canadian Prime Minister Justin Trudeau meets with President Trump at the Group of Seven leaders summit in La Malbaie, Quebec, on June 8. (Justin Tang/Canadian Press)
Trump’s victory: Canada opens up its milk market to U.S. farmers. Trump tweeted often about how unfair he thought it was that Canada charged such high tariffs on U.S. dairy products. Canada has acomplex milk and dairy system. To ensure Canadian dairy farmers don’t go bankrupt, the Canadian government restricts how much dairy can be produced in the country and how much foreign dairy can enter to keep milk prices high. Trump didn’t like that, and dairy was a major sticking point in the negotiations.
In the end, Canada is keeping most of its complex system in place, but it is giving greater market share to U.S. dairy farmers. U.S. negotiators say they got a major victory by forcing Canada to eliminate the pricing scheme for what are known as Class 7 dairy products. That means U.S. dairy farmers can probably send a lot more milk protein concentrate, skim milk powder and infant formula to Canada (and those products are relatively easy to transport and store).
Canada’s victory: Chapter 19, allowing for a special dispute process, stays intact. Canadian Prime Minister Justin Trudeau said repeatedly that he wanted to keep Chapter 19 in place, and that’s exactly what happened. The U.S. side pushed hard to eliminate this chapter, but in the end, it stayed.
Chapter 19 allows Canada, Mexico and the United States to challenge one another’s anti-dumping and countervailing duties in front of a panel of representatives from each country. This is generally a much easier process than trying to challenge a trade practice in a U.S. court. Over the years, Canada has successfully used Chapter 19 to challenge the United States on its softwood lumber restrictions.
Mexico and Canada get assurance Trump won’t pound them with auto tariffs. Trump has repeatedly threatened to slap hefty tariffs on car and vehicle parts coming from overseas into the United States. Along with the new trade deal, his administration signed “side letters” allowing the two nations to mostly dodge Trump’s auto tariffs.
The side letters say Canada and Mexico can continue sending about the same vehicles and parts across the border free of charge, regardless of whether auto tariffs go into effect down the road. Only parts above that quota could face tariffs.
Trump’s steel tariffs stay in place (for now). Canada wanted Trump to stop his 25 percent tariffs on Canadian steel. That didn’t happen — yet. The two countries are still discussing lifting those tariffs, but a senior White House official said Sunday that process is on a “completely separate track.” Trudeau has called the steel tariffs “insulting and unacceptable” because the two nations are such close allies.
Improved labor and environmental rights. The USMCA makes a number of significant upgrades to environmental and labor regulations, especially regarding Mexico. For example, the USMCA stipulates that Mexican trucks that cross the border into the United States must meet higher safety regulations and that Mexican workers must have more ability to organize and form unions. Some of these provisions might be difficult to enforce, but the Trump administration says it is committed to ensuring these happen — a reason U.S. labor unions and some Democrats are cheering the new rules.
Increased intellectual property protections. The new IP chapter is 63 pages and contains more-stringent protections for patents and trademarks, including for biotech, financial services and even domain names. Many business leaders and legal experts believed these updates were necessary given that the original agreement was negotiated 25 years ago.
Big drug companies gain more footing in Canada. U.S. drug companies will now be able to sell pharmaceuticals in Canada for 10 years before facing generic competition. That’s up from eight years of so-called “market protection” now.
Deal must be reviewed after 6 years. The USMCA stipulates that the three nations will review the agreement after six years. If all parties agree it’s still good, then the deal will continue for the full 16 year period (with the ability to renew after that for another 16 years). This was a compromise provision: Trump wanted ability to renegotiate the deal frequently. Ultimately, there will be a review, but it won’t happen until after Trump leaves office.
Chapter 11, giving investors a special way to fight government decisions, is (mostly) gone. Chapter 11 is eliminated entirely for Canada and mostly for Mexico, except for some key industries such as energy and telecommunications. Chapter 11 gave companies and investors a special process to resolve disputes with one of the governments in NAFTA. The idea was that if investors put a lot of money into a project and then the government changed the rules, there was a clear dispute process — outside the court system — where investors could get their problem resolved.
Critics argue that Chapter 11 was mainly used as a way for big corporations to get taxpayer money, but businesses say it was necessary to ensure they weren’t harmed by sudden changes when new governments came into power in Mexico, Canada or the United States. In the end, Chapter 11 is mostly gone, except for a few key industries, such as oil, that lobbied hard to be able to challenge the Mexican government if it changes the rules and tries to nationalize its energy sector again.
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Trump and Trudeau can tout this as a major victory ahead of key elections in their countries. It’s a lot less clear whether ‘NAFTA 2.0’ is good for Mexico and U.S. automakers.
October 1 at 9:53 AM
The United States, Canada and Mexico finalized a sweeping new trade deal late Sunday, just hours before their Oct. 1 deadline. President Trump was up early Monday tweeting that the agreement is “a great deal for all three countries,” and Prime Minister Justin Trudeau said Sunday night that it was a “good day for Canada.”
The deal is expected to take effect around Jan. 1, 2020. Congress has to approve it, a process that will take months, but confirmation looks likely, given that Republicans are pleased Canada got on board and some Democrats are pleased with the stronger labor provisions.
Here’s a look at who’s smiling — and who’s not — as the world sees this news. (For a rundown of what’s in the deal, click here).
Winners:
President Trump. He got a major trade deal done and will be able to say it’s another “promise kept” to his voters right before the midterm elections. And he won the messaging game — he persuaded Canada and Mexico to ditch the name “NAFTA,” for North American Free Trade Agreement, which he hated, and to instead call the new agreement “USMCA,” for United States-Mexico-Canada Agreement. It’s not a total trade revolution, as Trump promised, but USMCA does make substantial changes to modernize trade rules in effect from 1994 to 2020, and it give some wins to U.S. farmers and blue-collar workers in the auto sector. Trump beat his doubters, and his team can now turn to the No. 1 trade target: China.
Prime Minister Justin Trudeau. There might not be a lot of love lost between Trump and Trudeau, but in the end, Trudeau didn’t cave much on his key issues: dairy and Chapter 19, the treaty’s dispute resolution mechanism. Trudeau held out and got what he wanted: Canada’s dairy supply management system stays mostly intact, and Chapter 19 remains in place, a win for the Canadian lumber sector. On dairy, Canada is mainly giving U.S. farmers more ability to sell milk protein concentrate, skim milk powder and infant formula. On top of the substantive issues, Trump went out of his way to criticize the Canadian negotiating team in the final days of deliberations, which Trudeau can play up as a sign of just how hard his staff fought on this deal.
Labor unions. This agreement stipulates that at least 30 percent of cars (rising to 40 percent by 2023) must be made by workers earning $16 an hour, about three times the typical manufacturing wage in Mexico now. USMCA also stipulates that Mexico must make it easier for workers to form unions. The AFL-CIO is cautiously optimistic that this truly is a better deal for U.S. and Canadian workers in terms of keeping jobs from going to lower-paying Mexico or to Asia, although labor is looking carefully at how the new rules will be enforced. It’s possible this could accelerate automation, but that would take time.
U.S. dairy farmers. They regain some access to the Canadian market, especially for what is known as “Class 7” milk products such as milk powder and milk proteins. The United States used to sell a lot of Class 7 products to Canada, but that changed in recent years when Canada started heavily regulating this new class. USMCA also imposes some restrictions on how much dairy Canada can export, a potential win for U.S. dairy farmers if they are able to capitalize on foreign markets.
Stock market investors. A major worry is over, and the U.S. stock market rallied Monday with the Dow gaining nearly 200 points.
Robert E. Lighthizer. Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin couldn’t get major trade deals done for the president, but U.S. Trade Representative Lighthizer did. He led negotiations with South Korea on the revamped U.S.-South Korea trade deal (KORUS) that the president just signed, as well as on the “new NAFTA.” Lighthizer is proving to be the trade expert closest to Trump’s ear.
Losers:
China. Trump is emboldened on trade. A senior administration official said Sunday that the U.S.-Canada-Mexico deal “has become a playbook for future trade deals.” The president believes his strategy is working, and he’s now likely to go harder after China because his attention won’t be diverted elsewhere (at least on trade matters).
U.S. car buyers. Economists and auto experts think USMCA is going to cause car prices in the United States to rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore. It’s unclear how much prices could rise (estimates vary), but automakers can’t rely as heavily on cheap Mexican labor now and there will probably be higher compliance costs.
Canadian steel. Trump’s tariffs on Canadian steel and aluminum remain in place for now, something Trudeau has called “insulting” since the two countries are longtime allies with similar labor standards.
Unclear:
Mexico. America’s southern neighbor kept a trade deal in place, but it had to make a lot of concessions to Trump. It’s possible this could stall some of Mexico’s manufacturing growth, and it’s unclear whether wages really will rise in Mexico because of this agreement. Big energy companies can also still challenge Mexico via Chapter 11, something that could constrain Mexico’s new government as it aims to reform energy policies.
Ford, GM, Chrysler and other big auto companies. There’s relief among auto industry executives that the deal is done, but costs will be high for big car companies: The steel tariffs are still in place on Canada; more car parts have to come from North America (not cheaper Asia); and more car components have to be made at wages of $16 an hour. It remains to be seen how car companies are able to adjust and whether this has long-term ramifications for their bottom lines.
Big business. Many business groups are relieved that Trump got a trilateral deal and didn’t end up tearing up NAFTA entirely, as he had threatened to do. And they like a lot of the trademark and patent provisions. But the details of USMCA include some losses for big business. Some regulatory compliance costs will probably rise, especially for automakers, and big business lost Chapter 11, the investor dispute settlement mechanism that companies have used to sue Canadian and Mexican governments (the one exception is that energy and telecommunications firms still get a modified Chapter 11 with Mexico).
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