NAFTA vs New Agreement: What’s the Difference?
The North American Free Trade Agreement (NAFTA) was signed in 1994 between the United States, Canada, and Mexico. It eliminated tariffs on goods traded between the three countries and established rules for investment and intellectual property. However, after years of criticism and threats to withdraw from the agreement, the United States, Canada, and Mexico renegotiated a new agreement called the United States-Mexico-Canada Agreement (USMCA), which took effect on July 1, 2020.
So, what’s the difference between NAFTA and the new agreement? Here are some key points:
1. Digital Trade: The USMCA includes a new chapter on digital trade, which addresses issues related to e-commerce, cross-border data transfers, and data storage. It prohibits customs duties on electronic transmissions and ensures that data can be transferred across borders without restrictions.
2. Labor Standards: The new agreement includes stronger labor protections, such as requiring Mexico to pass laws that recognize workers’ rights to unionize and receive higher wages. It also requires all three countries to adopt and maintain laws that protect workers’ rights and improve working conditions.
3. Environmental Standards: The USMCA includes commitments to protect the environment, such as requiring all three countries to adopt and maintain laws and regulations related to air and water quality, and to enforce laws related to conservation and the protection of endangered species.
4. Auto Industry: The USMCA includes provisions related to the automotive industry, such as requiring that 75% of a vehicle’s content be made in North America in order to qualify for duty-free treatment, and requiring that at least 40% of the content of passenger vehicles and light trucks be made by workers earning at least $16 per hour.
5. Sunset Clause: Unlike NAFTA, the USMCA includes a sunset clause, which means that the agreement will automatically expire after 16 years unless all three countries agree to extend it.
In conclusion, the USMCA includes several updates to NAFTA, including provisions related to digital trade, labor standards, environmental protections, the automotive industry, and a sunset clause. While the agreement is still new and its effects are yet to be seen, it represents a modernization of the trade relationship between the United States, Canada, and Mexico.