The United States and Mexico recently reached a new trade agreement that has significant implications for both countries. The United States-Mexico Trade Agreement, or USMCA, replaces the North American Free Trade Agreement (NAFTA) and sets new rules of trade between the two countries. The agreement was signed by the leaders of both countries in November 2018 and is now in effect.
One of the major changes in the USMCA is the increased requirements for North American content in automobiles. Under the new agreement, at least 75% of automobile content must be made in North America (up from 62.5% under NAFTA) in order to qualify for duty-free treatment. In addition, at least 40% of the content must be made by workers earning at least $16 per hour. This is intended to incentivize the use of higher-wage workers in the automotive industry in both the United States and Mexico.
Another key change in the USMCA is the opening up of the Canadian dairy market to American producers. Under NAFTA, Canada had placed strict quotas on the amount of dairy that could be imported into the country. Under the USMCA, those quotas will be increased, allowing American dairy producers to sell more of their products in Canada.
In addition to these major changes, the USMCA also includes provisions related to labor and environmental standards. The agreement requires that Mexico pass legislation giving workers the right to form unions and collectively bargain for better wages and working conditions. It also includes provisions related to the protection of marine environments.
The USMCA is expected to have a significant impact on the economies of both the United States and Mexico. Supporters of the agreement argue that it will help to create jobs and increase economic growth in both countries. Critics, however, argue that the agreement does not go far enough in addressing some of the long-standing issues related to trade between the two countries.
Overall, the USMCA represents a significant shift in the economic relationship between the United States and Mexico. As the agreement is implemented over time, it will be important to keep a close eye on its impact on both countries and on the broader global economy.