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US – Canada – Mexico Trade Deal

October 1, 2018

NAFTA 2.0: The new accord, to be officially called the U.S.-Mexico-Canada Agreement makes significant changes to the rulebook that has governed continental commerce since 1994. The biggest impact is expected to be on the region’s largest industry, autos, requiring a greater portion of vehicles to be made in North America and with high-wage labor in the U.S. and Canada.

Key points:

• The new agreement is named the United States-Mexico-Canada Agreement (USMCA);
• To qualify for preferential treatment, automobiles will require 75% North American content, up from the existing 62.5% (by 2020, in all countries);
• At least 30% of the workers producing a vehicle must earn $16.00 USD per hour (by 2020); by 2023, this raises incrementally to 40% (in all countries);
• The US is introducing a quota system to protect Mexico and Canada from any future tariffs applied to vehicles and parts. Each country has a “side letter agreement”;
• Canadian supply management continues to exist but US dairy producers will have greater market access in Canada;
• Chapter 11 is gone; Chapter 19 (now Chapter 31) remains for dispute settlements;
• US steel tariffs remain in place;
• Chapter 7 introduces new de minimis levels for all three countries: US and Mexico, at least $100 USD; Canada, at least C$150 for customs duties and C$40 for taxes.
It is important to note that the new agreement has been made in principle and must be ratified by the three countries’ legislative bodies and processes.

 

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