SEMA eNews Vol. 21, No. 40, October 4, 2018

U.S., Mexico and Canada Reach Deal on Replacing NAFTA

By SEMA Washington, D.C., Staff

The North American Free Trade Agreement (NAFTA) may soon be replaced by the United States-Mexico-Canada Agreement (USMCA). The three countries have agreed to update and rename the 1994 accord that created the trilateral trading bloc. The current timetable calls for the new agreement to be signed in late November and submitted to the U.S. Congress for ratification.  

Major provisions include a requirement that vehicles have 75% North American content, compared with 62.5% currently. At least 40%–45% of the vehicle content must be made by workers earning at least $16 an hour. Labor standard provisions included in the accord could lead to higher wages in Mexico. The new USMCA accord includes an automatic 16-year sunset clause, although reviews every six years can keep extending the pact. The accord outlines how each nation must allow cross-border enforcement of IP rights. The pact includes enforceable rules to curb countries from manipulating their monetary exchange rates. Mexico and Canada would not be subject to national-security tariffs if such were imposed on imported automobiles and auto parts. However, relief from the current national-security tariffs on steel and aluminum are subject to separate negotiations.

For more information, contact Stuart Gosswein at stuartg@sema.org.

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