Many Canadian exporters and investors can now take a deep breath after 13 months of NAFTA renegotiations, as the new United States-Mexico-Canada Agreement (USMCA) has been reached. There has been much commentary on the achieved outcomes of the new pact. What’s equally important, perhaps, is that the ambiguity over U.S.-Mexico-Canada trade rules has largely been resolved. Elevated policy uncertainty is bad for hiring and is even worse for investment.
Here are some highlights in the new USMCA:
Steps to ratification of the USMCA
U.S. President Donald Trump had warned of imposing auto tariffs. Canada and Mexico were able to secure annual export quota allowances to the U.S. through side letter agreements, which allow for growth in duty-free continental auto trade. U.S. steel and aluminum tariffs remain in place, but the three governments have committed to revisit the issue in the near-term.
President Trump will provide the text of the agreement for Congressional review. With U.S. midterm elections to be held in November, new lawmakers in the U.S. will likely pass the enabling legislation.
It’s likely the U.S. president will sign the agreement before the new Mexican President Andrés Manuel López Obrador (AMLO) enters office on December 1, 2018. A 60-day period of edits and revisions by U.S. trade staff is currently underway and should be completed by early December.
Based on U.S. guidelines in the Trade Promotion Authority, the expected passage into law in the US would likely occur around the summer of 2019. The USMCA also needs to be passed in the Mexican and Canadian legislatures.
The NAFTA renegotiation is still far from over. But by removing the fog of uncertainty around trade rules between the United States, Canada and Mexico, we can now see a path to a 21st century trade deal in North America.