USMCA Vs NAFTA: How New Deal Will Change Free Trade In North America

The three countries reached an agreement after more than a year of negotiations.

Donald Trump
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The three countries reached an agreement after more than a year of negotiations.

The United States, Canada, and Mexico have reached a trilateral deal that will replace the 24-year-old NAFTA (North American Free Trade Agreement), which President Trump once called “a disaster.”

According to Bloomberg, the three countries reached the new deal, named USMCA (U.S.-Mexico-Canada Agreement) after Canadian and American negotiators spent last weekend working hard to submit the new trade agreement before the self-imposed deadline of October 1.

The deal will be signed by late November by the countries’ leaders, and then U.S. Congress and the respective legislatures in Canada and Mexico will have to approve it, which will take months to happen. Most of the trade deal’s key provisions are not expected to take place until 2020.

Trump tweeted that the new deal was “great” for the three countries. The region trades more than $1 trillion every year. Canadian Prime Minister Justin Trudeau praised the pact and described it as a “good day for Canada & our closest trading partners.” The NAFTA negotiator for Mexican President-elect Andres Manuel López Obrador, Jesus Seade, also shared a Twitter post, saying “NAFTA 2 will give certainty and stability to trade,” as per Bloomberg.

The new deal ends a period of tensions between the U.S. and Canada, who are usually close allies when it comes to trade. However, the two leaders had been clashing in key issues such as dairy and dispute settlement for the past few months.

As reported by Washington Post, apart from the new name, the newly-agreed deal will also change free trade in North America in key sectors.

Dairy farmers: Trump had been a fierce critic of how high the tariffs Canada charged on U.S. dairy products were, and Trudeau has now agreed to give American dairy farmers a greater market share. Canada is also eliminating the pricing scheme for certain types of dairy products that are imported from the U.S.

The car industry: In order to encourage companies to manufacture more cars and truck parts in North America, the new deal will define that, starting in 2020, a car or truck has to have 75 percent of its pieces manufactured in Canada, Mexico, or the United States, so it can qualify for zero tariffs.

Trump also assured Mexico and Canada that he won’t hit them with hefty tariffs on car and vehicle parts coming into the United States.

Trump’s steel tariffs will remain as they are for now. Trudeau has said the 25 percent tariffs on Canadian steel are “insulting and unacceptable.”

Environmental and labor regulations will receive an upgrade, especially for Mexico.

Big U.S. drug companies will be given a bigger chance to compete in Canada.