Differences between NAFTA and USMCAN
Differences between NAFTA and USMCAN, the new trade agreement between Mexico, USA and Canada.
25 years after the creation of NAFTA, Canada, USA and Mexico have reached a new free trade agreement. This new treaty started with the request of president Donald Trump, who considered the original treaty as “a mess” for his country. The negotiations for USMCA (or CUSMA in Canada and T-MEC in Mexico) lasted 13 months in which the representatives of the original members updated conditions for free trade among these countries, taking into consideration the global changes that have occurred in the last few decades.
The new agreement was signed by Trudeau, Trump and the former president of Mexico, Peña Nieto in October 2018. However, it wasn’t until July 2019 that the Mexican senate ratified the treaty, it must also be ratified by the USA and Canadian legislatures before it can come into effect, hopefully during 2020.
Both agreements are significantly similar, but there are differences between them. One of these differences is chapter 24, where environmental rules are the core. In this chapter there are some relevant ordinances about CO2 emissions, restrictions to trading products than can affect the integrity of the ozone layer, measures that must be taken to avoid flora and fauna trafficking, the legal framework enforcement for environmental matters, and the inclusion of regulation of the North American Commission for Environmental Cooperation.
Chapter 27 contains a brand-new topic in the negotiation: the implementation of measures to fight corruption in member countries. The forecasts related to transparency in business information and investment are capital. There should be a commitment from all members to not overlook the enforcement of domestic laws to guarantee the fight against corruption.
Due to the technological changes occurred in the last 25 years, it was prevailing to include a chapter on electronic trade. Section 19 verses about the regulations for the transactions of digital products such as software, music and books that will be not taxed. On the other hand, the parts must be committed to protecting consumers from possible fraud through the creation of laws to regulate the digital commerce in every involved country and reinforce the state’s entities to create a cybersecurity environment.
The automotive industry will be affected too. The USMCA includes new requirements for the free trade of vehicles, which must be 75%-produced in one of the three nations (at this moment the regulation demands only 62.5%). The agreement includes a clause that determines workers paid at least US$16 per hour must be producing 40%-45% of the vehicles, this comes with the intention of avoiding relocation of factories in Mexico.
The new treaty includes a “sunset” clause, that is nothing more than an expiration date after 16 years. The deal is also subjected to be reviewed every six years and the three nations can decide if they extend the USMCA or not. This agreement represents an opportunity to consolidate North America as a competitive region with plenty of possibilities to export its products and empower its supply channels, in opposition to protectionist paradigms and new global challenges.
