The president touted it as a major political victory before running for re-election, but has since been covered by the coronavirus pandemic and other crises.
Here are some key changes in USMCA:
Boosting the automotive industry
USMCA has created new motivations for manufacturing cars and trucks in North America. It requires 75% of auto parts to be manufactured in one of the three countries (higher than the current 62.5% regulation) in order to maintain tariffs when moving between the three signatories.
It also requires workers with a minimum wage of $16 per hour to make more auto parts, which may promote U.S. manufacturing that has higher wages than Mexico.
The International Trade Commission report found that these changes will add 28,000 jobs to the industry in six years, while also causing consumers to pay a slight increase in car prices. However, a report by the Trump administration is more positive, and the transaction is expected to create 76,000 automotive jobs within five years.
Mexican labor law strengthened
Manufacturing workers have long blamed the North American Free Trade Agreement for sending jobs to Mexico, where wages are lower. Democrats’ priority is that the US Military and Security Council strengthens the enforcement of labor laws and regulations, creating a more level playing field for American workers.
Democrats have reached an agreement with the Trump administration to strengthen the law enforcement language in the agreement. The changes made have won the support of AFL-CIO, the largest union federation in the United States.
The agreement provides an inter-agency committee that will monitor the implementation of labor reforms and compliance with labor obligations in Mexico. It also allowed for the first time in any U.S. trade agreement to allow a “rapid response” team to examine whether certain facilities violated workers’ rights and impose tariffs or fines on products produced on those facilities.
U.S. dairy farmers gain more market access
The original North American Free Trade Agreement eliminated tariffs on most agricultural products traded between these three countries. Canada and Mexico are already the two largest export markets for American farmers and ranchers.
USMCA will keep these tariffs at zero, while further opening the US dairy, poultry and egg markets to Canada. In return, the United States will allow more Canadian dairy products, peanuts and peanut products, and a small amount of sugar to transit.
Update NAFTA for the digital age
The USMCA includes a wide range of new interests in technology in a chapter on digital trade, which is not part of the original NAFTA. The new regulations are not expected to directly create new employment opportunities, but they can promote the development of US companies in other ways.
For example, the new trade agreement prohibits Canada and Mexico from forcing US companies to store their data on domestic servers. It also ensures that US companies will not be sued in Canada and Mexico for the many content that appears on their platforms.
Environmental protection measures
The agreement provided $600 million to address environmental issues in the region, such as the overflow of sewage from Tijuana, which affected San Diego, and made the regulations easier to implement by removing the requirement to prove that the violations affect trade.
Although the new law enforcement measures are satisfactory to most Democrats, their efforts are not enough for environmental organizations such as Sierra Club to support the agreement.