- On Sunday night, President Trump got his wish for a significantly revised North American trade deal. After more than a year of intense negotiations, the United States, Canada and Mexico reached an agreement to update the North American Free Trade Agreement, the 1994 pact that governs more than $1.2 trillion worth of trade among the three nations.
The new deal won’t go into effect right away. Most of the key provisions don’t start until 2020 because leaders from the three countries have to sign it and then Congress and the legislatures in Canada and Mexico have to approve it, a process that is expected to take months.
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This actually looks surprisingly good for all parts, at a first glance. Dumb and pointless, but no big deal. Slightly more jobs, but cars will be slightly more expensive because of this. At least it benefits/hurts all three nations equally. While the goal of this might very well be to make Mexican factories less competitive, the biggest winners here are workers. This will hurt a bit for Canadian dairy farmers, but doesn't sound like a huge deal. I'm not too familiar with this, but it sounds like a good thing. Wait, what? A Republican administration has negotiated a treaty that is good for the environment and encourages unionising? Did I accidentally stumble through a portal to Bizarro World? Can't really comment on this, but as the article mentions, a lot has changed in 25 years, so it might be overdue. Good for business, bad for sick people, but overall not a very big deal. I don't really know enough about this to comment on it. One interesting thing to me about this new deal are the superficial similarities to TPP, including the parts about intellectual property, and the parts about minimum wages for some workers. Yet more proof that the only reason to withdraw from the TPP was because Obama wanted to stay in it.New name. Goodbye NAFTA. The new deal will be known as the United States-Mexico-Canada Agreement, or USMCA. Trump, who had long disdained NAFTA, had suggested that he might call it the “USMC,” in honor of the U.S. Marine Corps, but in the end, USMCA won out.
Big changes for cars. The goal of the new deal is to have more cars and truck parts made in North America. Starting in 2020, to qualify for zero tariffs, a car or truck must have 75 percent of its components manufactured in Canada, Mexico or the United States, a substantial boost from the current 62.5 percent requirement.
There’s also a new rule that a significant percentage of the work done on the car must be completed by workers earning at least $16 an hour, or about three times what the typical Mexican autoworker makes.
Canada is keeping most of its complex system in place, but it is giving greater market share to U.S. dairy farmers. U.S. negotiators say they got a major victory by forcing Canada to eliminate the pricing scheme for what are known as Class 7 dairy products. That means U.S. dairy farmers can probably send a lot more milk protein concentrate, skim milk powder and infant formula to Canada (and those products are relatively easy to transport and store).
Canada’s victory: Chapter 19, allowing for a special dispute process, stays intact. Canadian Prime Minister Justin Trudeau said repeatedly that he wanted to keep Chapter 19 in place, and that’s exactly what happened. The U.S. side pushed hard to eliminate this chapter, but in the end, it stayed.
The USMCA makes a number of significant upgrades to environmental and labor regulations, especially regarding Mexico. For example, the USMCA stipulates that Mexican trucks that cross the border into the United States must meet higher safety regulations and that Mexican workers must have more ability to organize and form unions.
The new IP chapter is 63 pages and contains more-stringent protections for patents and trademarks, including for biotech, financial services and even domain names.
U.S. drug companies will now be able to sell pharmaceuticals in Canada for 10 years before facing generic competition. That’s up from eight years of so-called “market protection” now.
Chapter 11, giving investors a special way to fight government decisions, is (mostly) gone. Chapter 11 is eliminated entirely for Canada and mostly for Mexico, except for some key industries such as energy and telecommunications.
I think cars might be the real interesting thing here... this will basically prevent any "low cost" cars from being sold in the US, because they will be more expensive, and eating into the mid-range cars. So expect to see the Toyota econoboxes of the world vanish from American market (after 2020, when this goes into effect), and for the "base model" car available in the US to be a 4-door sedan. (Can't remember the details - I'm sure KB will chime in with exacts - but the profit margin on a low end car is only in the hundreds of dollars, right now. Triple the assembly costs due to the 3x increase in the Mexican minimum wage, and that profit margin is gone. Increase the price of the car to make up for that loss, and now you are selling your "economy" car for the same price as your mid-range sedan. That ain't gonna fly. It'll be easier to just drop the cheap cars entirely from the catalog.) BUT. This only applies to cars made and sold IN AMERICA. Now American car manufacturers (and everyone else), can throw off the shackles of American emissions and safety regulations, and freely innovate in the foreign markets. Because the North American auto market is now completely isolated and insulated from the foreign market - no American cars being exported because they are too expensive, and no foreign cars being imported - and the chains are off for Ford China, or Ford India. Make whatever you want! It no longer has to meet California's highly restrictive emissions/safety standards! In 15 years, American roads will look like Cuba's roads... vintage, simple, old, vehicles, being maintained and operated by shadetree mechanics. While other markets will basically have flying electric cars. More Winning! More MAGA!