What Trade Agreement Has Recently Replaced Nafta

On July 1, 2020, the United States-Mexico-Canada Agreement (USMCA) went into effect, replacing the North American Free Trade Agreement (NAFTA). The USMCA is a modernized trade agreement that aims to improve upon NAFTA`s shortcomings and promote fair trade among the three North American countries.

One of the main areas of focus in the USMCA is the automotive industry. Under NAFTA, a vehicle could be considered “made in North America” if 62.5% of its parts came from the region. The USMCA raises this requirement to 75%, with 40-45% of the parts being made by workers earning at least $16 per hour. This provision aims to incentivize more production in North America and reduce reliance on foreign-made parts.

Another significant change in the USMCA is the inclusion of labor and environmental standards. The agreement requires Mexico to implement new labor laws that protect workers` rights to organize, bargain collectively, and participate in unions. It also establishes an intergovernmental committee to address environmental issues and commits all three countries to enforce environmental laws and regulations effectively.

The USMCA also includes provisions protecting intellectual property, digital trade, and agricultural trade. It allows for more US access to Canada`s dairy market and sets up a dispute resolution mechanism to settle disagreements between the three countries.

The replacement of NAFTA with the USMCA was met with mixed reactions. While some praised the agreement for its updated provisions and potential to boost North American trade, others criticized it for not going far enough in protecting workers and the environment. Regardless, the USMCA is expected to shape trade among the three countries for years to come.