SEMA eNews Vol. 21, No. 49, December 6, 2018

New U.S.-Mexico-Canada Trade Agreement Now Subject to Congressional Ratification

By SEMA Washington, D.C., Staff

Leaders for Canada, Mexico and the United States have signed a new regional trade pact to replace the North American Free Trade Agreement (NAFTA). The United States-Mexico-Canada Agreement (USMCA) is now subject to ratification procedures by each country to implement the accord.  

The U.S. International Trade Commission has been directed to issue a report reviewing the potential economic impact of the deal. The Trump Administration must notify the U.S. Congress of any necessary changes to U.S. law needed to implement the accord, and Congress must then approve the changes in the form of enacting legislation. President Trump announced that he will begin a six-month process to withdraw the United States from NAFTA, pressuring Congress to ratify the USMCA or revert to pre-NAFTA trading rules. However, it is unclear if the president has authority to unilaterally withdraw the United States from the pact without Congressional approval.

Major provisions of the USMCA 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, SEMA senior director, federal government affairs, at stuartg@sema.org.

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