After a multi-year ratification process, the United States-Mexico-Canada Trade Agreement (USMCA) enters into force on July 1st, delivering on President Trump’s promise to update trade agreements for the benefit of the American worker.
As the focus turns toward carefully reopening the country and getting Americans safely back to work, this is welcome good news for the American economy.
The USMCA is a much-needed update to the 25-year-old North American Free Trade Agreement (NAFTA). The global economy has changed significantly since NAFTA was ratified in 1992. The new USMCA recognizes this reality and modernizes trade relations between the three nations to better fit the 21st century global economy.
The July 1st date is the culmination of a multi-year ratification process by the U.S., Canada, and Mexico:
- On November 30, 2018, the initial USMCA agreement was signed by the U.S., Canada, and Mexico.
- On December 19, 2019, the final agreement was signed by the U.S., Canada, and Mexico.
- On January 29, 2020, the U.S. ratified the agreement after passing both chambers of Congress.
- On March 13, 2020, Canada ratified USMCA.
- On April 3, 2020 Mexico ratified USMCA.
The trade agreement will increase wages, increase GDP by $68.2 billion, and create 176,000 jobs, according to the International Trade Commission’s report. It will also increase U.S. exports to Canada by $19 billion, and to Mexico by $14 billion. The Tax Foundation estimates that these positive economic effects are identical to a 4% corporate tax cut.
The trade deal is going to help revitalize the automotive industry. The Office of the United States Trade Representative estimates that USCMA ratification would add $34 billion in new automotive manufacturing investment, $23 billion in new annual purchases of U.S. automotive parts, and 76,000 jobs in the next five years.
The USMCA will also help American farmers. The increased market opportunities for Americans is projected to increase agriculture exports by more than $314 million. Through USMCA negotiations, Canada agreed to open market access to American farmers who wish to sell dairy, poultry, and eggs in Canada. In return, Canada will have access to American dairy and peanut products. The industry would benefit from stabilization of international markets, especially the U.S.’s two biggest trading partners that buy close to 2/3 of U.S. agricultural exports.
Finally, the Trump trade deal brings trade into the 21st century with numerous provisions on e-commerce, cross-border data flows, and encryption. This is the first trade agreement in U.S. history to include these protections.
Ultimately, the USMCA will help American workers, businesses, and innovators all across the country as the pandemic runs its course.