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The U.S, Canada, and Mexico Are Entering into a New Trade Agreement Called Usmca That Will Replace Nafta

Essay by   •  October 17, 2018  •  Coursework  •  320 Words (2 Pages)  •  190 Views

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Joey Jiang

10/9/18

New North America Trade Agreement

The U.S., Canada, and Mexico are entering into a new trade agreement called USMCA that will replace NAFTA. 

What are the components of the new agreement? Compare and contrast the two. What are pros and cons of the new agreement for US companies? For Mexico? For Canada?

A: The USMCA mandated that even more car parts be sourced from North America, even if the parts are costlier than those available elsewhere. A minimum amount of a car must be produced by workers earning above a certain wage. Higher costs will mean that the U.S consumers will pay more for cars build in North America which could trigger more imports from Asia and Europe. The Mexicans and Canadians agreed that 75% of parts for cars they build for export within North America should be in North America in order for qualify for duty-free treatment, as opposed to 62.5% under NAFTA. USMCA do not protect carmakers in Mexico and Canada from the fallout of Trump imposing such tariffs. Canada will have to limit its diary exports as the USMCA introduced trade-restricting elements for milk protein concentrates, skim milk powder and infant formula. By demanding that Canada impose export taxes effectively would limit, not encourage, its trade with the rest of the world. Canadian businesses can no longer challenge U.S government policies and vice versa.

Under the USMCA, Canada would need to inform Trump three months before beginning to negotiate with China. If China and Canada reach a deal, Trump could terminate the USMCA with six months’ notice. The three countries agreed to important new provisions on e-commerce, which didn’t exist when NAFTA took effect in 1994.

USMCA is a slightly upgraded and better version of the NAFTA. It has minimal appreciable effect on the U.S. trade deficit with Mexico. Trump has already wrecked the United States’ relationship with two of its most important allies with his malign comments.

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