What is USMCA?

The new U.S.-Mexico-Canada Agreement (USMCA) replaces the North American Free Trade Agreement, or Nafta.

Per the WSJ the new agreement updates the rules of trading for the three countries with the following key provisions:

• Mexican Labor: U.S. labor unions and Democrats have long complained that Mexican workers can’t always form unions freely and demand fair pay, a situation they say puts pressure on U.S. manufacturing jobs. The Trump administration’s USMCA has new additional labor rules, not included in the current Nafta, as well as new enforcement procedures demanded by Democrats.

• Auto 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. A certain proportion of a car will have to be produced by workers with higher wages, and a greater proportion of components will have to originate in North America.

• Digital Freedom: USMCA, unlike the current Nafta, includes rules mandating the free flow of data among the three countries. This and other novel provisions on exchange rates and other areas aren’t so crucial for Canada and Mexico but could later be applied to pacts with more restrictive countries or even China.

• Agriculture: A deal to pass USMCA means farmers of major crops no longer have to worry about President Trump potentially pulling out of the existing Nafta and leaving them fewer major export markets. USMCA also gives dairy farmers more access to Canada.

• Pharma: Big drugmakers are likely to be disappointed, since Democrats pushed the Trump administration to remove language that would have protected expensive biologic drugs from generic imitators for 10 years. The existing Nafta treaty has no such drug protections.

What are Industry leaders saying?

We captured below feedback from key industry leaders as they respond to the progress made last week.

1. Labor Federation President Richard Trumka on the United States-Mexico-Canada Agreement (USMCA), provided final text accurately reflects changes, “Make no mistake, we demanded a trade deal that benefits workers and fought every single day to negotiate that deal; and now we have secured an agreement that working people can proudly support.”
2. Statement from UAW: “UAW members have opposed NAFTA since its inception a quarter century ago because they feared it would lead to the closing of countless manufacturing plants throughout our country and the moving of hundreds of thousands of good U.S. jobs to Mexico. Time has unfortunately proven UAW members right and it is for this very reason we welcomed the renegotiation of NAFTA (also known as USMCA) and pushed for more to be done. While the final text of the agreement has not been made available for review, we already know that USMCA Is highly unlikely to bring factories back from Mexico, as some have promised. It will hopefully stop some of the bleeding of U.S. jobs and UAW members will vigilantly monitor enforcement of the agreement to make sure multinational corporations treat their workers right. We will also fight to make sure Mexico fully implements its labor law reforms and puts an end to company unions and sham contracts that pave for U.S. companies to send jobs south of the border.”
3. Thomas J. Gibson, president and CEO of the American Iron and Steel Institute (AISI), issued the following statement in response to the announcement, “The steel industry welcomes today’s agreement between the administration and congressional Democrats that clears the way for a congressional vote on the USMCA. Implementation of the USMCA is critical to strengthening the steel industry’s competitiveness in the face of the continued challenges from global excess capacity and weakening demand. We urge Congress to quickly pass this new trade agreement before the end of this year.”
4. Per AutoNews, GM praised the news. “General Motors is pleased to see the USMCA agreement moving forward on a path towards approval,” the automaker said in a statement. “We view the agreement as vital to the success of the North American auto industry and have long supported efforts to modernize it in a way that strengthens the industry and positions it to be a global leader. “GM has invested $23 billion in its American manufacturing operations over the last ten years and has accounted for 26 percent of all U.S. manufacturing investment since 2010. We will continue to do our part to enhance manufacturing and sourcing opportunities in the United States. The certainty that comes from having a trade agreement like USMCA in place allows our company to invest and source with confidence and therefore encourage swift passage of the agreement in Congress.”
5. Ford Motor Company, has long been a supported of USMCA stating on their website, “Ford strongly supports the new United States-Mexico-Canada Agreement because it modernizes and improves NAFTA and will grow automotive manufacturing and supplier operations and jobs in the U.S.” AutoNews quoted their response to the news last week, “It allows the U.S. auto industry to be globally competitive, encourages U.S. r&d in this new era of mobility, and provides a framework for good-paying U.S. jobs,” Ford said. “This benefits our customers, the workers and families who depend on a strong Ford, and the suppliers who help fuel our success. We look forward to reviewing the details of this final bipartisan agreement and urge Congress to take advantage of today’s progress and momentum by passing the USMCA without delay.” They also provide a USMCA fact sheet on their website as a reference.
6. Paul Ryan, vice president of trade and competitiveness for Global Automakers, which represents foreign automakers with U.S. operations, and spokesman for his group’s Here For America initiative, per the Detroit Free Press said the deal would benefit consumers. “Enactment of the USMCA will provide clarity and continue an integrated North American market, which is good news for American consumers, workers and automakers. Here For America will work with the administration, Congress and our trading partners to ensure that the rules necessary to implement the agreement are clear, fair and workable.”
7. The Retail Industry Leaders Association (RILA) COO and incoming president Brian Dodge issued the following statement, “Leading retailers welcome the trade deal agreed to by our North American neighbors. Retailers rely on complex global supply chains to ensure customers have access to the products they desire at the best possible price. This deal is vitally important to grocers who rely heavily on trade with Mexico to supply affordable produce to American families. Building efficient and predictable supply chains requires public policy leaders to establish enforceable free-trade agreements. The certainty this newly negotiated deal brings will allow retailers to invest, plan for the future, create jobs, and provide their customers with the widest possible selection of affordable and quality products.”
8. American Trucking Associations leaders hailed an agreement between the United States, Mexico and Canada that paves the way for USMCA’s ratification in Congress. “Now with a clear path to USMCA’s ratification, this is an historic victory for truck drivers, motor carriers and the entire American economy,” said ATA President Chris Spear. “The vast majority of trade in North America moves on truck, with $772 billion worth of goods crossing our borders with Mexico and Canada every year. USCMA will provide the certainty our industry needs while ensuring the United States remains competitive on the world stage.” “Trade is a tremendous driver of revenue and creator of jobs in trucking, which is why passing USMCA has been so important to our industry,” said ATA Chairman Randy Guillot, president of Triple G Express Inc., New Orleans, Louisiana. “Trade with our two closest neighbors supports nearly 90,000 Americans in trucking-related jobs and generates $12.62 billion in annual revenue for our industry. As USMCA deepens our economic ties, we expect these figures – like our economies – to continue to increase.”

Overall the tone from industry leaders appears very positive on this move forward for the USMCA. The final agreement will still need to be approved by Congress, Canada and Mexico, although timing on these approvals is still to be determined at this point.