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New Trade Accord Between US, Canada and Mexico Goes Into Effect

July 1, 2020 by Dan McCue
New Trade Accord Between US, Canada and Mexico Goes Into Effect

WASHINGTON – It’s NAFTA no more.

As of 12:01 this morning, the U.S. – Mexico – Canada trade agreement, better known as the USMCA, is in full effect, formally replacing the 26-year-old North American Free Trade Agreement

“Today marks the beginning of a new and better chapter for trade between the United States, Mexico and Canada,” U.S. Trade Representative Robert Lighthizer said in a statement. 

“The USMCA contains significant improvements and modernized approaches that will deliver more jobs, stronger worker protections, expanded market access, and greater opportunities to trade for companies large and small,” Lighthizer said.

“We have worked closely with the governments of Mexico and Canada to ensure that the obligations and responsibilities of all three nations under the agreement have been met, and we will continue to do so to ensure the USMCA is enforced,” he concluded.

During a full day of testimony on Capitol Hill last month, Lighthizer vowed to take action “early and often” to challenge violations to the trade deal once it took effect.

First on his to-do list as of today is to start a discussion with Mexico over its failure to approve any biotech products from the United States over the past two years — even when they were developed in compliance with Mexican law.

Lighthizer told lawmakers he anticipated having to file a state-to-state dispute over the issue to resolve it.

Another issue dogging USMCA is a series of legal challenges to a new labor law championed by Mexican President Andres Manuel Lopez Obrador which is intended to ensure that workers can freely organize and unions are granted full collective bargaining rights.

A ruling against it would harm Mexico’s ability to deliver on provisions aimed at ending labor contracts agreed to without worker consent that are stacked in favor of companies and have kept wages chronically low in Mexico.

Democrats in the U.S. Congress had insisted on the stronger labor provisions last year before granting approval, prompting a substantial renegotiation of terms first agreed to in October 2018.

Lighthizer also said the United States would be closely monitoring Canada’s implementation of the deal’s provisions on U.S. dairy sales, and would also bring a case against Canada if it turned out U.S. farmers were not getting the full benefit of the agreement.

In a statement, President Donald Trump called the USMCA, the “largest, fairest, and most balanced trade agreement ever negotiated” saying it contains “innovative provisions to help grow the economy and support American jobs.”

“It is a tremendous victory for our manufacturers and autoworkers, meaning more cars and trucks will be produced in the United States,” the president continued. “The USMCA is also a historic breakthrough for American agriculture. Canada will provide greater access for American dairy products, poultry, and eggs, and finally give fair treatment to American-grown wheat. In addition, the USMCA includes groundbreaking provisions to address digital trade, services, small business, and more, which will protect America’s competitive edge in technology and innovation.”

Meanwhile in Canada and Mexico, the trade pact finally going into effect was cause for celebration.

“This agreement, the result of extensive negotiations over the past three and a half years, is an essential pillar in preserving free and fair trade in North America,” said Chrystia Freeland, Canada’s deputy prime minister.

“The new NAFTA protects jobs and prosperity for workers in all three NAFTA countries. It is good for Canada and good for Canadian workers. It will help ensure that North America emerges stronger from the COVID-19 pandemic,” she said.

In a statement made through Twitter, Lopez Obrador, said “It is time to strengthen our economic and commercial ties with Canada and the US,” adding that it is also time “to seek friendly and cooperative relations.”

López Obrador also revealed he will travel to Washington July 8-9 to meet with Trump and celebrate the new accord.

Mexican Foreign Secretary Marcelo Ebrard did not provide details of next week’s visit, but said July 8 would be a bilateral encounter with Trump and a July 9 meeting that could include Canadian Prime Minister Justin Trudeau.

In an op-ed published in many US. newspapers Wednesday, Lighthizer said the deal increases country of origin requirements for auto manufacturing from 62.5% under NAFTA to 75%. This means at least three-quarters of autos and trucks qualifying for tariff benefits will be made in North America.

“More of those cars and trucks sold in North America will also be built by workers earning at least $16 per hour, reducing the wage disparity that led to the outsourcing of U.S. manufacturing jobs. These provisions are a main reason why the USMCA is expected to create 76,000 new jobs in the U.S. automotive sector alone over the next five years,” the trade representative continued.

Lighthizer also said the USMCA is a big win for American farmers, particularly in regard to the dairy, chicken and eggs sales into Canada.

“Additionally, Canada agreed to stop dumping millions of dollars in subsidized dairy products that squeeze American producers out of third-country markets,” he said. “Furthermore, the USMCA takes steps to fix Canada’s discriminatory grain grading system that put American wheat growers at a competitive disadvantage. We can expect a $2.2 billion increase in U.S. agriculture and food exports thanks to the USMCA.

“For the small businesses that keep our economy competitive and dynamic, the USMCA makes it easier for them to participate in cross-border trade and tap into foreign markets by updating trade rules that will lower costs and cut burdensome red tape,” Lighthizer said two weeks ago.

“With the USMCA’s entry into force, we take another giant step forward in reaching this goal and advancing President Trump’s vision for pro-worker trade policies,” he concluded.

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