The North American Free Trade Agreement (NAFTA) has been a cornerstone of trade relations between the United States, Mexico, and Canada for over 25 years. However, in 2018, negotiations began for a new trade agreement, resulting in the United States-Mexico-Canada Agreement (USMCA). Here are the key differences between NAFTA and the new trade agreement.
Rules of Origin
NAFTA required that 62.5% of vehicle parts be made in North America to qualify for tariff-free trade. USMCA raised this requirement to 75%, meaning that more parts must be made within the USMCA countries to receive tariff-free status. The new agreement also includes specific sourcing rules for steel and aluminum, requiring a certain percentage to come from the USMCA countries to qualify for tariff-free trade.
Labor Provisions
NAFTA had few requirements for labor standards in its member countries. USMCA includes new provisions to protect workers` rights and improve working conditions, including guarantees for collective bargaining, freedom of association, and labor protections for migrant workers. The new agreement also includes an enforcement mechanism for labor disputes, allowing for inspections of factories and holding companies accountable for labor violations.
Environmental Provisions
NAFTA had limited environmental protections, focusing primarily on the enforcement of anti-pollution measures. USMCA includes new provisions for protecting wildlife, conserving biological diversity, and improving air and water quality. The new agreement also requires all three countries to enforce their environmental laws and includes an independent panel to investigate and address any disputes.
Intellectual Property
NAFTA had limited protections for intellectual property, particularly in the digital realm. USMCA includes stronger protections for patents, trademarks, and copyrights, as well as provisions for online piracy and counterfeiting.
Sunset Clause
NAFTA had no expiration date, making it a permanent agreement between the three countries. USMCA includes a sunset clause, which means that the agreement will expire after 16 years, with a review every six years to determine if it will be renewed or revised.
In conclusion, while USMCA builds on NAFTA’s foundation, it includes significant changes that reflect the economic and political realities of today. With more stringent rules of origin, stronger labor and environmental protections, and improved intellectual property regulations, the new trade agreement reflects a more modern approach to trade relations.