NAFTA is now called the U.S.-Mexico-Canada Agreement, or USMCA, after the three countries reached a new deal late Sunday night. From The Wall Street Journal:
The biggest impact is expected to be on the region’s largest industry, autos, requiring a greater portion of vehicles to be made in North America and with high-wage labor in the U.S. and Canada.
The new deal for the first time sets rules for financial-services and digital businesses that have emerged since the bloc was created, aimed at pleasing sectors from drugmakers to Wall Street.
One of Canada’s last-minute concessions made to finalize the broader agreement was a pledge to curb protection for its dairy industry, a policy Mr. Trump has frequently criticized as unfairly restricting American exports.
The U.S. in turn compromised by dropping its demands to scrap the original treaty’s Chapter 19 provisions, or the special Nafta courts allowing member states to challenge trade restrictions imposed by the others.
— Steve Herman (@W7VOA) October 1, 2018
— TicToc by Bloomberg (@tictoc) October 1, 2018
Congress needed the agreement “by midnight to proceed under complicated ‘fast track’ trade rules.” The leaders of the countries will likely sign it within 60 days.
When it comes to automobiles, those with “75 percent of its components manufactured in Canada, Mexico or the United States” will qualify for zero tariffs while those autos “should have at least 30 percent of the work on the vehicle done by worker earning $16 an hour. That gradually moves up to 40 percent for cars by 2023.”
Canada also opened up its dairy market to America, which is YUGE due to Canada’s complex dairy market. Canada limits “how much dairy can be produced in the country and how much foreign dairy can enter to keep milk prices high” in an effort to keep the dairy farmers from going into bankruptcy:
U.S. negotiators say they got a major victory by forcing Canada to eliminate the pricing scheme for so-called “Class 7” dairy products. That means U.S. dairy farmers can likely 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).
Chapter 19 remains intact to the delight of the Canadians:
Chapter 19 allows Canada, Mexico and the United States to challenge each other’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.
Canada and Mexico received assurance that President Donald Trump will not “pound them with auto tariffs.” However, the steel tariffs remain for now.
Democrats and unions enjoy the new labor and environment rules:
The new USMCA makes a number of significant upgrades to environmental and labor regulations, especially regarding Mexico. For example, USMCA stipulates that Mexican trucks that cross the border into the United States must meet higher safety regulations and 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.
I’m not lying when I say that unions like the new labor rules. The Teamsters approved of this language in the deal:
Many labor officials say they’ve been pleasantly surprised with strong language in the agreement pushing Mexico to bolster its unions, including protecting “the right to strike.” American unions have argued that the lack of such provisions in the original Nafta meant the pact encouraged factories to relocate south of the border in search of cheaper workers.
“We…note with approval the considerable progress on workers’ rights,” Teamsters General President Jim Hoffa said in a statement, calling them “superior to the original Nafta, and also to the Trans-Pacific Partnership” negotiated by President Obama. (Mr. Hoffa was also pleased with Mr. Lighthizer’s success in getting Mexico to agree to a longstanding Teamsters demand imposing new restrictions on Mexican trucking in the U.S.)
Lori Wallach at the left-leaning Public citizen said this “deal includes some important improvements which we have long advocated.” Ian Bremmer even called it a win.
USMCA is not an entirely new deal, but it’s more than a tweak on NAFTA.
Improved IP protections, new auto rules, expanded access to Canada dairy, improved labor/environment regs, and more.
Trump will exaggerate the win.
But it’s a win.
— ian bremmer (@ianbremmer) October 1, 2018
l’m hardly a Trump fan.
But give credit where credit is due.
New NAFTA/USMCA deal is a win.
— ian bremmer (@ianbremmer) October 1, 2018
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