USMCA, Trump’s new NAFTA deal, explained in 500 words

Mexico just ratified the deal — but Canada and the US still have to follow suit.

On Wednesday, Mexico became the first country to ratify the trade deal to replace NAFTA, known as the United States-Mexico-Canada Agreement, or USMCA.

President Donald Trump will meet Thursday with Canadian Prime Minister Justin Trudeau to discuss the status of the USMCA. Trudeau is likely to win approval from his Parliament, but he doesn’t want to move too far ahead of the US. Right now, Trump needs the support of House Democrats, who still have some objections to the deal.

The USMCA is essentially NAFTA 2.0, with a few updates. The pact has been tweaked to include changes for automakers, stricter labor and environmental standards, intellectual property protections, and digital trade provisions.

Here are the biggest changes:

•    Country of origin rules: Automobiles must have 75 percent of their components manufactured in Mexico, the US, or Canada to qualify for zero tariffs (up from 62.5 percent under NAFTA).

•    Labor provisions: 40 to 45 percent of automobile parts must be made by workers who earn at least $16 an hour by 2023. Mexico passed new labor laws to give greater protections to workers. Democrats still want tougher enforcement, though.

•    US farmers get more access to the Canadian dairy market: The US got Canada to open up its dairy market to US farmers, a big issue for Trump.

•    Intellectual property and digital trade: The deal extends the terms of copyright to 70 years beyond the life of the author (up from 50). 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 asprohibiting duties on things like music and e-books, and protections for internet companies so they’re not liable for content their users produce.

•    Sunset clause: The agreement adds a 16-year “sunset” clause — meaning the terms of the agreement expire, or “sunset” after 16 years. The deal is also subject to a review every six years, at which point the US, Mexico, and Canada can decide to extend the USMCA.
The USMCA is signed. Now it needs to be approved.

Trump, Trudeau, and Mexico’s then-President Enrique Peña Nieto signed the deal in November, but it still needs to be ratified by all three governments.

In May, the Trump administration struck a deal to end steel and aluminum tariffs on Canada and Mexico, something both countries demanded if they were to pass the USMCA. That cleared a major hurdle to ratification in both countries. Trump almost derailed this by threatening tariffs on Mexico over immigration — but the administration backed down, and Mexico has now overwhelmingly passed the USMCA.

Canada is also moving to ratify the agreement. But the US Congress hasn’t taken up the USMCA, and Democrats are seeking tougher labor and environmental enforcement provisions. Trump’s top trade official and House Democrats both think they can reach a consensus — but that hasn’t happened yet.

Source: VOX