The most notable trade agreement is the United States-Mexico-Canada Agreement (aka NAFTA 2.0) signed on November 30, 2018, which aims to replace and modernize the North American Free Trade Agreement.
Trade agreements between nations — even nations run by thoughtful, experienced leaders — are inevitably born of compromises between competing political agendas.
Imagine, then, how much more difficult it is to cut a deal when one of the national leaders involved is unpredictable, temperamental and often uninformed. Seen in that light, the trade pacts, NAFTA 2.0, and those with China unfortunately are less likely to benefit local rural economies of scale. Make no mistake, it has been difficult for negotiators to keep their eye on the ball on this one.
This updated agreement therefore should not be mistaken as a revolutionary new trade deal. Pundits have dubbed it “NAFTA 2.0” for a reason; apart from the ease of pronunciation, this deal is simply an updated version of NAFTA. Only a handful of U.S. industries will see noticeable changes, of which Union County interests are not significant and most will conduct business as usual. While the changes in North America are not tremendous, reaching a deal does add a new dimension to the ongoing trade spat with China. Article 32.10 in the USMCA creates rules against negotiating with nonmarket economies. This has the potential to dictate how negotiations with China work for the U.S., China and Mexico.
In case someone may not appreciate the effects of imports and how they affect the economy:
Imports are foreign goods and services bought by residents of a country or, in our case, Union County. Residents include citizens, businesses and the government. It doesn’t matter what the imports are or how they are sent. They can be shipped, sent by email or even hand-carried in personal luggage on a plane. If they are produced in a foreign country and sold to domestic residents such as through Walmart (one of the largest importers), they are imports and controlled in part or whole by one or more free trade agreements.
Here are the biggest changes:
Country of origin rules: Automobiles must have 75% of their components manufactured in Mexico, the U.S. or Canada to qualify for zero tariffs (up from 62.5% under NAFTA).
Labor provisions: 40-45%of automobile parts must be made by workers who earn at least $16 an hour by 2023. Mexico has also agreed to pass laws giving workers the right to union representation, extending labor protections to migrant workers and protecting women from discrimination. The countries can also sanction one another for labor violations.
• U.S. dairy farmers get more access to the Canadian dairy market.
• Intellectual property and digital trade: The deal extends the terms of copyright to 70 years beyond the life of the author. It also extends the period that a pharmaceutical drug can be protected from generic competition and includes new provisions to deal with the digital economy, such as prohibiting duties on things like music and e-books, and protections for internet companies so they’re not liable for content their users produce.
• American automobile industry: In more than 25 years since the signing of NAFTA, Mexico’s minimum wage has increased only slightly, to about $4.70 per day in 2018, while U.S. auto workers have seen their pay increase at a significantly slower rate than that of other countries. Mexico, for this reason and its proximity to the U.S., is a strongly desired location for manufacturers of all types (farm equipment included), specifically automakers, and has directly contributed to the decline of the U.S. domestic industry. This is unlikely to change.