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The 'New Nafta' US-Mexico-Canada trade deal

  • Published at 08:32 pm November 30th, 2018
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US President Donald Trump, Mexico's President Enrique Pena Nieto and Canada's Prime Minister Justin Trudeau attend the USMCA signing ceremony before the G20 leaders summit in Buenos Aires, Argentina, November 30, 2018 Reuters

President Donald Trump had long denounced Nafta, which he claimed was killing US jobs, and demanded a renegotiation

The US, Mexico and Canada signed a successor deal to the North American Free Trade Agreement (Nafta) on the sidelines of the G20 summit on Friday. 

President Donald Trump had long denounced Nafta, which he claimed was killing US jobs, and demanded a renegotiation.

Controversy has continued even with what to call the new deal. Washington calls it the United States-Mexico-Canada Agreement (USMCA), although the other two parties have their own names putting their countries first. 

The revised accord now goes for ratification by the legislatures of the three countries. Here's what it contains:

Autos: higher pay, local content

Ending Nafta would have meant tearing up the continent's closely-integrated auto supply chain. But Ottawa, Mexico City and Washington have now agreed to sweeping changes to manufacturing and labor requirements that US officials say should boost wages and discourage moving production offshore. 

The deal will require that 75% of auto content be made in the region, increased from 62.5%, and that 40-45% be made by workers earning at least $16 an hour. 

Mexico also agreed to continue to recognize US auto safety standards, unless Mexican regulators conclude they are inferior to their own standards. 

Auto tariff relief

Trump has threatened to use a national security justification to impose steep tariffs on the hundreds of billions of dollars in autos the US imports annually. But the USMCA includes side letters that agree to exempt Mexico and Canada up to a threshold of 2.6 million vehicles a year, as well as an unspecified amount of light trucks, and tens of billions of dollars in auto parts. 

However, the new deal does not resolve the punishing steel and aluminum tariffs imposed worldwide earlier this year, and on Mexico and Canada since May. 

Dairy: Canada makes concessions

Canada, which guarantees prices for its dairy producers through its managed supply system, agreed to open its borders a little wider to American milk, cheese, cream, butter and other goods. 

The concession from Ottawa removed a major sticking point that Trump said was a deal breaker. 

Canada will also eliminate categories of low-cost dairy goods, and will allow greater imports of US chicken, eggs and turkey.

Settling disputes

The US agreed to Canada's insistence that the dispute settlement system -- formerly known as Chapter 19 -- remain in the deal. Canadian officials resolutely rejected Trump's demand to scrap provisions to resolve disagreements through international arbitration, something Ottawa has successfully used to challenge US tariffs. 

However, the agreement does make some changes to the more controversial "Investor-State Dispute Settlement" powers, which critics said had allowed powerful companies and wealthy investors to invalidate local laws and court decisions through unaccountable arbitration. 

Intellectual property

The new agreement requires that signatories allow equal copyright treatment for writers, composers and others from member countries, requiring a minimum term of the author's life plus 70 years for copyrighted works. 

Digital trade

When Nafta took effect in 1994, e-commerce hardly existed in its current form and modernizing its provisions was a key premise of the talks. The new agreement prohibits customs duties for digitally distributed goods like software and games, e-books, music and movies. 

It would also limit local governments' powers to force companies to disclose propriety source code or place restrictions on where data may be stored. 

The no-China-deals clause

Tucked in the agreement is a provision that appears designed to stop either Canada or Mexico from seeking a better deal with Beijing. If any signatory seeks to enter into a free-trade agreement with a "non-market-economy" -- read China -- the other parties will then be allowed to cancel the three-country deal and replace it with a bilateral agreement. 

US ties with China have grown increasingly contentious, and Washington has slapped tariffs on more than $250 billion in imports from that country. 

An alternative 'sunset clause'

The new trade pact will remain in force for 16 years, but will be reviewed every six years. If the parties decide to renew the agreement, it will be in effect for another 16 years. But if there is a problem, officials would have 10 years to negotiate to resolve their differences before the treaty would expire. Canadian and Mexican negotiators, as well as US industry, had outright rejected US demands that any new Nafta contain a "sunset clause" requiring the parties to re-authorize the agreement every five years. 

Labor rights

US Trade Representative Robert Lighthizer says the labor protections in the deal -- which had been part of a side agreement to Nafta -- are the strongest ever negotiated, and are enforceable. Under the agreement, "Mexico commits to specific legislative actions to provide for the effective recognition of the right to collective bargaining," according to the USTR office. 

The agreement also contains requirements on internationally recognized labor rights: prohibiting the imports of goods made through forced labor, deterring violence against workers and ensuring protections for migrant workers.

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