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5 Things to Know About USCMA

The North American Free Trade Agreement, known as NAFTA, is one of the most important free trade agreements in the world. With a market of more than 450 million people, it is estimated that each year the three members, the United States, Canada, and Mexico exchange more than a trillion dollars in products and services. Despite its importance for the regional economy, the agreement had to be renegotiated in 2017 due to Donald Trump’s protectionist policies. This resulted in several rounds of negotiations over a period of almost two years. The most relevant issues discussed were how to make the deal fairer for the three countries and how best to update regulations to address new topics like e-commerce.

After an extensive process of renegotiation, on December 10th, the new agreement was signed by each country. The new deal, now called the United States, Canada and Mexico Agreement, or USMCA, will allow an exchange of goods according to the demands of the current markets.

Below, we will discuss some of the most relevant new features of the deal and which industries will be affected the most.

Easing rules for e-commerce

With the exponential growth of e-commerce, USCMA negotiators saw the need to update the rules for shipping packages between countries. The new deal stipulates the increase of tax-free shipping quotas. Each country will have its own amounts, but the United States will have the largest, with tax-free shipments below the value of $800. Additionally, the new deal will create new legal frameworks to promote consumers’ trust and the protection of personal data.

More restrictions on the automotive industry

An area that underwent many changes was the car manufacturing industry. The new agreement strengthened the rules of origins to exempt from taxes the cars produced in the region. From now on, 75% of the materials used to manufacture car will have to be produced in North America in order to be tax exempt. Moreover, 45% of the value of the car will have to be produced by workers paid at least 16 dollars an hour.

Improvements on workers’ rights

Another controversial topic during the renegotiation was workers’ rights, particularly regarding Mexican workers. One of the harshest critiques of the original agreement is the discrepancy between the treatment of workers from each of the three countries. Companies benefit from cheap Mexican labor, resulting in the shutdown of factories in Canada and the United States. To address this issue, new regulations will be applied, such as higher wages and the strengthening of union associations. 

Cross-border transportation

In order to enhance and make cross-border transportation more efficient, the new agreement stipulates new rules for the documentation of goods. From now on, no port or checkpoint will be allowed to request additional documentation other than what is already specified in the agreement. Also, electronic documents will have the same legal value as paper documents, and harmonization between government organizations will be promoted.

The anti-dumping mechanism remains untouched

An important chapter that the American negotiators tried to abolish was Chapter 19, which details mechanisms for the resolution and settling of anti-dumping disputes. After much deliberation, the three countries agreed to keep this chapter untouched, which is a huge victory for Canada, which has won many disputes against the United States over accusations of anti-dumping practices in the lumber industry.

Without a doubt, the new agreement will present both challenges and opportunities for any business with foreign trade operations. If you want to expand your business and benefit from the new opportunities of USCMA, Woodward Logistics is the ally you need and can count on. We draw upon decades of experience and expertise to provide top quality services that include transportation and customs brokerage. Visit our website and learn about the solutions we have for your company.

References

Expansión. (21 de Enero de 2020). La industria automotriz corre el riesgo de que el T-MEC juegue en su contra. Obtenido de Expansión: https://expansion.mx/empresas/2020/01/21/la-industria-automotriz-corre-el-riesgo-de-que-el-t-mec-juegue-en-su-contra

Kirby, J. (29 de January de 2020). USMCA, Trump’s new NAFTA deal, explained in 600 words . Obtenido de Vox: https://www.vox.com/2018/10/3/17930092/usmca-mexico-nafta-trump-trade-deal-explained

Rios, V. (19 de Diciembre de 2019). Los trabajadores mexicanos son los ganadores del nuevo acuerdo comercial con Estados Unidos . Obtenido de The New York Times: https://www.nytimes.com/es/2019/12/19/espanol/opinion/tmec-mexico.html

T21. (30 de October de 2019). Impacto del T-Mec en el transporte de carga transfronterizo. Obtenido de T21: http://t21.com.mx/terrestre/2019/10/30/impacto-t-mec-transporte-carga-transfronterizo