US, Mexico, and Canada established new deal


It took three parties more than a year of intense negotiations to reach the final agreement. Eventually, the deal was settled on the 30th of September. The new deal will replace the 25 years old NAFTA agreement.

Since Trump took presidentship in 2017, he made several blustery statements about the original NAFTA deal, making threats to withdraw the US from NAFTA. Many politicians, lawmakers, and business people believed that a breakdown in relations between the US, Mexico, and Canada is inevitable. These three countries have always been parts of one supply chain and the potential break-up in their relationships may have hit the economies badly. However, it seems like this is not going to be the case. Donald Trump and his Canadian and Mexican counterparts are going to sign the agreement by the end of November. Nevertheless, the deal still needs to undergo the ratification of all three governments. Mexican and Canadian parliaments are expected to do so. The US Congress, on the other hand, is a big question. The deal is called USMCAthe United States-Mexico-Canada Agreement.

As for the terms of the agreement, one may call it NAFTA 2.0. Following are the biggest changes:

Cars manufacturing: One of the key points of the deal was related to the car industry. More cars and truck parts are going to be made in North America from now on. Starting from 2020, to get zero tariffs, a car or truck needs 75% of its components to be produced in Canada, Mexico or the United States. NAFTA deal held this rate at 62.5%.

Labor salary: 40% of all work on the vehicles needs to be done by workers earning not less than 16 USD per hour. The innovation should be implemented starting from 2020. Many experts believe that this rule will help workers in North America, but it should be noted that car prices might rise.

The US gets more access to Canadian dairy market: The main thing that Trump has argued about is that Canada charged high tariffs on U.S. dairy products. Canadian government placed restrictions on how much exactly of the foreign dairy can be imported to keep milk prices high. US farmers will now have increased quota on their import production.

Intellectual property: the agreement prolongs the terms of copyright to 70 years beyond the author’s life.

The deal is expected to benefit the interests of all three parties. Officials described this agreement as “a big win for workers, manufacturers, and farmers”. The arrangement is due to be reviewed every six years and is due to end in 16 years. However, every country has the right to engage in discussion and extend the deal. However, following the recent lesson, Canada is expected to work on a wide range of alternatives in order to avoid its economy being too dependent from its neighborhoods.