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New ‘NAFTA’ brings at least 16 years of stable trade


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On Sunday, September 30, 2018, Canadian Prime Minister Justin Trudeau met with President Trump to discuss possible changes to NAFTA. The two leaders agreed in principle to update the agreement. NAFTA was originally created in 1994 to oversee trade among the U.S., Mexico and Canada.

The changes and new provisions will not start immediately. The leaders of all three countries, including Congress and the legislatures of Canada and Mexico all need to approve it. (In Canada, the constitution does not require approval from the parliament, but the Mexican Senate does need to review and approve. The U.S. Congress has 60 days to review the agreement.) The projected start date is 2020.

Because of the significant changes, the name of the agreement will no longer be NAFTA. The new deal will be known as the United States-Mexico-Canada Agreement, or USMCA.

One of the major goals, asked for by President Trump, was to have more car and truck parts made in North America. The USMCA states that 75% of components must be manufactured in Canada, Mexico or the U.S. to qualify for zero tariffs. NAFTA requires only 62.5 percent. Also, there is a new requirement that at least 30 percent of the work done on the vehicles must be completed by workers earning at least $16 per hour (to begin in 2020). This will move up gradually to 40 percent by 2023. President Trump has assured both Canada and Mexico that he will not institute hefty tariffs on the vehicle parts if the USMCA is approved.

Another significant change is in the milk market agreement between the U.S. and Canada. The current market for dairy products in Canada is governed by a complex system. The Canadian government restricts how much dairy can be produced and/or imported. The system will remain in place, but a greater market share will be given to U.S. dairy farmers.

The USMCA stipulates that the three nations will review the agreement after six years. If all three agree that it is still acceptable, the agreement will continue for the full 16-year period, with the ability to renew it after that for another 16 years.

The full text of the agreement can be found at https://bit.ly/2xOQCHm

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