Friday, October 19, 2018

YMCA - I Mean - the New USMCA Trade Agreement

By Angela Lopez

On September 30, 2018, it was announced that the United States, Mexico, and Canada had come to an agreement to replace The North American Free Trade Agreement  (NAFTA) with the United States–Mexico–Canada Agreement (USMCA).

Though NAFTA will remain in force until the USMCA is ratified by its members, the new trade agreement is the result of a renegotiation of the original NAFTA that the member states undertook from 2017 to 2018.

The new agreement includes Chapter 16, (a provision essentially unchanged from the original NAFTA text) which outlines rules for the temporary entry of business persons and professionals.  The Chapter allows employers in the United States, Canada, and Mexico to access professional labor from all three countries.

In the United States, Chapter 16 lets businesses hire professional Canadian and Mexican workers in more than 60 professional categories on temporary work visas, currently referred to as NAFTA Professionals, TN and TD Visas.  The visas are valid for up to three years and can be renewed indefinitely as long as the underlying requirements are met.

The agreement puts to rest concerns that the current administration sought to cap the renewals and scale back the number of professions covered under Chapter 16, advocated by some as  conflicting with the administration’s “Buy American, Hire American” ethos.  While numerous conservative voices were calling for its curtailment,  the Canadian negotiators, the U.S. Chamber of Commerce, and others wanted the list of professions expanded to include digital occupations that didn’t exist when NAFTA was introduced in 1994.

In a joint statement, the U.S. Trade Representative Robert Lighthizer and Chrystia Freeland, Canada’s Foreign Minister, said the USMCA was a win for workers in both countries.  “USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade, and robust economic growth in our region.  It will strengthen the middle class and create good, well-paying jobs, and new opportunities for the nearly a half-billion people who call North America home.”

Agreement Highlights Include:

USMCA Changes NAFTA in Six Discrete Areas

  1. Auto companies must manufacture at least 75%of a car's components in Canada, Mexico, or the United States, up from 62.5% under NAFTA. At least 30% of the car must be made by workers earning at least $16 an hour, a percentage that is expanded to 40% in 2023. Autos that don't meet these requirements will be subject to tariffs.

  2. Canada will eliminate its complex pricing scheme for Class 7 products -- that includes milk protein concentrate, skim milk powder, and infant formula. It also allows certain cheeses to be marketed in Mexico and the United States and opens the wine market in British Columbia.

  3. Mexican trucks will be required to meet U.S. safety standards before crossing the border. Although this was included in the original NAFTA agreement, it was withdrawn by the U.S. Congress. Mexico must also allow workers to form unions.

  4. Provides more protection for patents and trademarks. Ironically,this adopts many of the intellectual property rights negotiated in the Trans-Pacific Partnership which was abandoned by the administration.

  5. U.S. drug companies can sell products in Canada for 10 years before facing generic competition. It was 8 years under NAFTA.

  6. With the exception of U.S. oil industries, companies can no longer use USMCA’s Chapter 11 to resolve disputes with governments. Chapter 19 dispute resolution panels will remain. These arbitration panels rule on whether a member country treated a partner's overseas investments unfairly.

The parties agreed to revisit the USMCA every six years. If they don't renew it, the deal will sunset in 16 years.

To view the full text of the agreement between the United States, Mexico, and Canada click here.

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