The US-Mexico-Canada Agreement (USMCA) is set to replace the 1994 North American Free Trade Agreement (NAFTA).
“The Surrey Board of Trade is pleased to hear today that the CUSMA Trade Agreement will move forward,” said Anita Huberman, CEO, Surrey Board of Trade. “We hope that this means continued benefits for Surrey’s business community, such as our manufacturing and agriculture industry sectors to remain free from tariffs and red tape, as well as economic confidence in doing business with the US and Mexico.”
“Now that this is done, finalizing a softwood lumber agreement needs to be a priority to help BC’s forestry sector – which also affects Surrey forestry and lumber businesses.”
Negotiators from the US, Mexico and Canada reached a deal to update the pact last year, but the agreement needed approval from legislatures in the three countries to move forward.
While the agreement falls short of what North American business sought, it generally maintains tariff-free access for Canadian products, retains labour mobility provisions, strengthens intellectual property protections, and ensures Canada has access to the most crucial aspects of dispute settlement.
“However, much work remains to be done to educate our business community on the new CUSMA.”
Summary of impacts of this trade deal:
The deal could benefit car-manufacturing workers from all three countries and help spur investment in the North American industry. The first provision requires that 75% – up from 62.5% – of the parts that go into a vehicle be made in the region to qualify for tariff-free treatment, a move intended to boost production in North America. The second requires 40-45% of a vehicle be made by workers earning at least $16 an hour – a measure aimed at discouraging firms from shifting work to lower-wage Mexico. (in the US, the average hourly pay for auto manufacturing workers was more than $22 as of June). The provisions are directed toward blue-collar workers in US manufacturing states. But they also offer a win to labourers in Canada and Mexico. The agreement-in-principle also means Canada will escape potentially devastating national security tariffs on car part imports.
Canada did grant more access to US producers. The CUSMA will grant them a 3.6% portion of Canada’s domestic market. It also gets rid of a recently implemented milk-pricing policy. Canadian Prime Minister Justin Trudeau has promised dairy farmers will receive compensation for the trade deal.
TECH COMPANIES AND ONLINE SHOPPERS
The new agreement raises duty-free shopping limits to $100 (USD) to enter Mexico and C$150 ($115 USD) to enter Canada without facing import duties – well above the $50 previously allowed in Mexico and C$20 permitted by Canada. That’s good news for online shoppers in Mexico and Canada – as well as shipping firms and e-commerce companies. Consumers are also expected to benefit from faster shipping. Canadian retailers had argued against raising the limits, fearing a more generous exemption could place them at a disadvantage.
STEEL AND ALUMINIUM SUPPLIERS
In June, the US government imposed tariffs on steel and aluminium imports from key allies in Europe, as well as from Canada and Mexico. It was suggested by the US government that the tariffs against its direct neighbours were tied by to progress achieved on the NAFTA negotiations. Now those tariffs will be dealt with separately. Mr. Trudeau says removing the tariffs remains a priority for both Canada and Mexico.
Pharmaceutical companies won 10 years of protection for patents on certain types of treatments known as biologics, as well as an expanded scope of products eligible for protection. Canada agreed to extend its monopoly period from eight years to 10 years and Mexico from five to 10 years. Still, that protection is shorter under current US law, which protects drug patents for 12 years. There are concerns this part of the agreement will raise the cost of drugs in Canada and affect its national healthcare system.