In January the USMCA was signed into law succeeding the North American Free Trade Agreement( NAFTA), which took effect in 1994. This new trade deal will make it easier to sell products to consumers in Canada and Mexico by eliminating complex and cost-prohibitive rules requiring small businesses to open foreign offices.
President Lopez of Mexico said the agreement will generate economic growth in the region through increased investment while improving labor conditions for workers in the three countries. “It also strengthens cooperation for development and allows us to better address social problems, such as migration, By guaranteeing growth, employment and well-being in our most marginalized regions, we’re facing the migratory phenomenon in a different way.”
With our Inaugural trip to Mexico City this coming we June we are eager to see the benefits come into fruition in the upcoming months.
Here’s a brief overview of what’s in it:
- Country of origin rules: Compared with Nafta, USMCA significantly tightens the rules that the auto industry has to follow in order to trade vehicles duty-free in North America. Automobiles must have 75 percent of their components manufactured in Mexico, the US, or Canada to qualify for zero tariffs (up from 62.5 percent under NAFTA). Starting next year, 30% of production would have to be done by workers earning an average wage of at least $16 an hour. By 2023, that percentage would rise to 40%
- Labor provisions: Mexico agreed to pass new labor laws to give greater protection to workers, including migrants and women. Most notably, these laws are supposed to make it easier for Mexican workers to unionize.
- US farmers get more access to the Canadian dairy market: The US got Canada to open up its dairy market to US farmers. It does not dismantle Canada’s “supply management system,” which dictates how much Canadian farmers should produce so they can be profitable. But Canada did agree to eliminate a program that helps sellers of certain milk products, at home and abroad, and open its market to American milk, cream, butter, cheese, and other products. In return, the United States expanded access to its market for Canadian dairy and sugar.
- Intellectual property and digital trade: The deal extends the terms of copyright to 70 years beyond the life of the author (up from 50). It also includes new provisions to deal with the digital economy, such as prohibiting duties on things like music and ebooks, and protections for internet companies so they’re not liable for content their users produce. It also sets new standards by prohibiting governments from asking tech companies to disclose their source code or put duties on electronic transmissions, such as algorithms that power AI systems. For any company that’s creating software and as you know, that’s not just software companies knowing that governments won’t be able to force them to disclose the source code for their software is a real benefit
- Sunset clause: The agreement adds a 16-year sunset clause — meaning the terms of the agreement expire, or “sunset,” after 16 years. The deal is also subject to a review every six years, at which point the US, Mexico, and Canada can decide to extend the USMCA.
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