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The Scorecard of the USMCA Protocol of Amendment

Published on December 23, 2019        Author:  and

 

 

The U.S. House of Representatives approved December 19 the United States-Mexico-Canada Agreement (USMCA) by an overwhelming margin of 385-41. The Senate is expected to do the same in mid-January. As everyone knows by now, USMCA is a revision and replacement for the 25-year-old North American Free Trade Agreement (NAFTA), a regional trade agreement that has generated over $1.3 billion in annual goods and services trade among the three nations. USMCA mostly follows NAFTA but makes significant changes or additions inter aliain automotive rules of origin, investor-state dispute settlement, intellectual property protection, digital trade, “sunset” provisions and protection of labor rights and the environment.

Whether USMCA overall is better or worse overall than the original NAFTA will not be fully clear until USMCA has been in force for some time, and different stakeholders (e.g., automotive producers versus labor unions, the United States v. Mexico) may vary in their assessments. What is perhaps most significant for the three NAFTA Parties and their stakeholders is that the USMCA assures that duty-free, quota-free trade within North America will continue for at least 16 years, more than long enough to outlast the Trump Administration. However, tighter automotive rules of origin and other regional content requirements may adversely affect industrial production, especially in the vehicle sector. Other changes affecting trade in goods are not highly significant, and agricultural trade is largely unaffected except for a modest opening for the United States of the Canadian milk solids market (about 3.6% of demand is promised for U.S. exports). Investor-state dispute settlement is reduced in scope with regard to U.S.-Mexico investment and eliminated entirely for U.S.-Canada investment disputes (Mexico and Canada remain part of the Transpacific Partnership Agreement (TPP), which included ISDS).

The USMCA would not have been approved by the House without a series of significant modifications. These changes were negotiated between the Trump Administration’s U.S. Trade Representative Robert Lighthizer, House leadership in the persons of Speaker Nancy Pelosi and Ways and Means Committee Chairman Richard Neal and, in the early weeks of December, Mexican Undersecretary for Foreign Affairs Jesus Seade. The USMCA Protocol of Amendment signed December 10 is the focus of this post. Read the rest of this entry…