The draft of the new version of NAFTA, the USMCA has been released.

USMCA (Revised NAFTA) deal: What you need to know

 In Compliance Updates

The United States, Canada and Mexico came to a last minute agreement on a revised trade deal that will replace NAFTA, It’s called the USMCA.

What’s next?  The three countries are expected to sign the deal before the end of November, at which point it will be up to Congress to approve.  This is likely to come up for a vote in 2019.

While negotiatons between the US and Mexico were solidified earlier in the summer, the tri-lateral agreement including Canada ran right up until the deadline imposed by the US.

With a renamed and renegotiated take on the 25-year-old NAFTA, it is important to take a look at and understand the two agreements in comparison.

  1. Opening up Canada’s dairy market

In what was a potential deal breaker, the new agreement will open up some of the Canadian dairy market to US farmers.  Under the new agreement, Canada will set new quotas that open the market up for US dairy, poultry and eggs.

In exchange, the US will allow more Canadian dairy, peanuts/peanut products, and a limited amount of sugar

Canada has also agreed to end a system that had kept the price of some milk products, including milk protein, low. This change will also allow more US dairy products to enter the Canadian market.

Canada recently made concessions in the Trans-Pacific Partnership and a trade deal with the European Union that also opened up its dairy market.

Understandably, the  Dairy Farmers of Canada have been outspoken against the changes, and fear the impact the changes will have on Canadian dairy producers

  • Car manufacturing

The new deal will require 75% of the vehicle’s parts to be made in North America in order for the car to be free from tariffs; this is about 12% higher than the previous agreement.

The primary goal of this change is to restore US manufacturing jobs.

  • Sunset Clause

Early in negotiations, the US was pushing for a 5 year sunset clause, which would have kept trade in a reasonably constant state of disarray for years to come.

Under the new USMCA, the agreement will stand for 16 years with an option to extend.

The United States, Canada and Mexico will be required to meet every six years to decide whether to do so.

  • Dispute resolution

This aspect of the negotiations was a clear sticking point for Canada, and in what is considered a win by the Canadian government Chapter 20 (the dispute resolution clause) will remain intact in its entirety.  It will, however, have a different chapter name

One difference that will be phased out is the ability for business is that another settlement process, formerly known as Chapter 11, will be phased out between the US and Canada. But will stick for certain key sectors like oil and gas, infrastructure and telecommunications between the US and Mexico.

The new agreement will also address issues that did not exist 25 years ago; digital piracy, electronic distribution and patents.

The negotiations on relief surrounding the retaliatory tariffs were not a part of the USMCA agreement, all parties are expected to start negotiating these upon the signing of the new agreement.

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