NAFTA 2.0: the USMCA trade deal takeaways

The USMCA (United States-Mexico-Canada Agreement) has been settled.

President Trump drafted a proposal that Canada and Mexico accepted about a year ago. It’s been in the House since then, under review and in negotiation.

The deal replaces NAFTA, which had been in effect since 1994, and therefore needed updating, for example, in the area of e-commerce.

The agreement will oversee $1.2 trillion of trade.

Among the changes that are mandated in the new deal, these are a few that you should probably know about:

cars and trucks

At least 30% of the work done to assemble a car or truck needs to be done by workers making at least $16 per hour. By 2023, at least 40% of that work must be done by workers earning that much. With this, it should not be cheaper to manufacture in Mexico, and therefore these jobs should remain in the US.

To qualify for zero tariffs, a car or truck must have 75% of its components manufactured in Canada, Mexico or the United States, which is an increase from 62.5%.

It’s possible that the mandate for higher wages for auto workers as well as the “origins” rule will result in auto price increases.

labor

Mexico is being forced to change its laws to make it easier for workers to unionize, which should cause Mexican wages to increase, which should mean fewer companies building factories in Mexico due to cheap labor, which should keep more jobs in the US. That’s the hope.

dairy farmers

U.S. farmers can now sell (some) daily products to Canada. Previously, Canada had very tight controls on their domestic dairy market.

intellectual property and environment

Among a few other changes, there are now more protections for patents and trademarks and more protections for marine environmental issues, including overfishing and illegal hunting.

pharmaceuticals

When President Trump first drafted the agreement, biologic drugs were to get 10 years of intellectual property protection, which means that essentially for ten years these drugs would not compete with generic versions. This is gone from the new document.

Canada currently has an eight-year protection for these drugs; Mexico has a five-year protection for drugs. US have a 12-year provision.

Prescription drug costs are being discussed all over the country right now as the 2020 campaign heats up. Democrats describe the change to the trade deal as an important step toward lowering prescription drug costs. Republicans, including President Trump, supported pharmaceutical companies drive to increase intellectual property protection.

What are biologics? How are they different from “regular” drugs and why do they need protecting? Let’s take a simple look at the issue.

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