Democrats and U.S. labor unions insisted on tougher enforcement to ensure Mexico follows through on its commitments. There will be a formal committee to monitor Mexico on labor issues (as well as “labor attachés” based in Mexico), according to a
fact sheet from Rep. Richard E. Neal (D-Mass.), chair of the House Ways and Means Committee. And there are clear benchmarks Mexico has to hit in the coming years — or face penalties. (We await details on what those punitive measures are).
Democrats cut sweeteners for pharma. The original USMCA text called for biologic drugs to get 10 years of intellectual property protection. (Canada currently does 8 years.) Democrats say the decade-long provision is gone now. Similarly, the original USMCA granted any pharmaceutical company three additional years of IP protection if it found a new use for an older drug.
Increased IP protections. The new IP chapter is over 60 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.
Increased environmental protections. The latest iteration of the environmental chapter is 30 pages long and makes a number of advancements, especially around protecting whales, fish and other marine wildlife from pollution and overfishing. In particular, Mexico agrees to enhance monitoring to stop illegal fishing, and all three countries agree to no longer subsidize fishing of overfished species. There’s also an enhanced customer verification to ensure only legally harvested goods are coming from Mexico.
Enhanced protections against currency manipulation. This is a big one for the Trump administration. The president tweets often about how other countries are devaluing their currencies so they can sell their goods cheaply on the global market (and undercut American products). The USMCA spells out that Canada and Mexico agree to “market-determined exchange rates” and that all three countries will get regular updates (typically monthly) on any government intervention in the currency markets. Canada and Mexico have generally been good about this already, but this is a clear signal to the Chinese of what Trump wants in other deals.
Mexico and Canada get an assurance that 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.
Deal must be reviewed after six 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).
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 NAFTA Chapter 19 in place, and that’s exactly what happened. The United States pushed hard to eliminate it, 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.
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. 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 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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