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  • Writer's pictureAmalga Group

What is USMCA and how does it differ from NAFTA?

The North American Free Trade Agreement (NAFTA) was a trade agreement between the United States, Canada, and Mexico that was implemented on January 1, 1994. The agreement eliminated tariffs and other trade barriers between the three countries, allowing for the free flow of goods and services across the North American continent.

One of the main goals of NAFTA was to increase trade and investment between the three countries. By removing trade barriers, the agreement made it easier and cheaper for businesses to sell their goods and services in other countries. This led to an increase in exports, which created jobs and economic growth. In addition, NAFTA helped to increase investment by making it easier for companies to operate across borders.

NAFTA also its critics, who argued the agreement led to job losses in certain industries, particularly in the United States. Critics also charged the agreement did not provide enough protections for workers and the environment. Despite these criticisms, the agreement has played a key role in strengthening the economic ties between the U.S., Canada, and Mexico.

In 2016, the U.S. announced its intention to renegotiate NAFTA. Negotiations between the three countries began in 2017 and were concluded in 2018, with the new agreement being named the United States-Mexico-Canada Agreement (USMCA). It was approved by the three countries in late 2018 and early 2019, and it took effect in July 2020.

USMCA includes several key changes to NAFTA, including stricter content rules for auto production aimed at boosting regional economic growth. It requires vehicles to contain at least 75 percent North American content within three years, while NAFTA mandated only 62.5 percent. The revised agreement also includes a requirement that 40-45% of a car's parts be made by workers who earn at least $16 per hour.

Additionally, USMCA includes more robust labor provisions and more powerful enforcement mechanisms, including requiring Mexico to make its unions more democratic by giving workers greater ability to organize and bargain. The country also must set up independent bodies such as labor courts to resolve disputes. USMCA also includes stronger intellectual property protections for patents, trademarks, and copyrights as well.

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