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USMCA: The 'historic' deal that Trump says replaces NAFTA
Trump said USMCA is "the most important trade deal we've ever made by far."
01 October, 2018
(Photo by Chip Somodevilla/Getty Images)
- The new agreement is between Canada, Mexico and the U.S.
- It's more of an updated version of NAFTA than a new agreement.
- The deal includes changes to trade terms and policies in sectors like dairy, auto manufacturing and intellectual property rights.
<p><span></span>In a last-minute agreement, Canada, Mexico and the U.S. have tentatively agreed to revisions of the 24-year-old North American trade deal. This new agreement, according to President Donald Trump, effectively replaces NAFTA with USMCA, which stands for the U.S.-Mexico-Canada agreement.</p><p>Trump said USMCA is "the most important trade deal we've ever made by far." </p><p>"We have successfully completed negotiations on a brand new deal to terminate and replace NAFTA and the NAFTA trade agreements with an incredible new U.S.-Canada-Mexico agreement," Trump said at Rose Garden news conference, adding that "it will transform North America back into a manufacturing powerhouse."</p><p>The U.S., Canada and Mexico are expected to sign the agreement at the end of November, though it will require legislative approval from all three countries. U.S. lawmakers are expected to vote on the deal in 2019, and it's unclear whether it would pass if Democrats take control of the House next month. </p><p>Here are some key parts of USMCA:</p>
Timeframe
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8xODY3ODU3My9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYyMjI5NzkxN30.dDwcER4ITrvyWkkEQC3SdvnPpdkaYnz84qEvmJwjc6g/img.jpg?width=1245&coordinates=0%2C102%2C0%2C23&height=700" id="fcc74" class="rm-shortcode" data-rm-shortcode-id="4c80756b55e394df64bbb8739a0695ca" data-rm-shortcode-name="rebelmouse-image" />US President Donald Trump after a phone conversation with Mexico's outgoing President Enrique Pena Nieto on trade on August 27. The new deal was made just hours before the October 1 deal deadline.
(Photo: MANDEL NGAN/AFP/Getty Images)
<p>The new agreement would take effect in 2020. Under the terms, the three countries would meet every six years to review and potentially renegotiate the deal, which would last 16 years, at which time the countries could agree to extend it.</p>Auto industry
<p>To encourage more localized car manufacturing, the new deal requires 75% of a car's parts to be produced in Mexico, Canada or the U.S. in order for automakers to avoid tariffs. That's an increase of about 12% compared to NAFTA.<br></p><p>In addition, nearly one-third of automobile manufacturing in the three countries must be done by workers earning an average production wage of $16 an hour.</p>Dairy
<p>Canada will open up its dairy market slightly by allowing American farmers to export about <a href="https://www.usatoday.com/story/news/2018/10/01/comparison-nafta-and-usmca-trade-agreements/1487163002/" target="_blank">$560 million worth of dairy products</a>. Canadian farmers criticized the move, but it's a general win for the U.S.<br></p><p>"The deal includes a substantial increase in our farmers' opportunities to export American wheat, poultry, eggs and dairy, including milk, butter, cheese, yogurt and ice cream," the president said Monday. "Those products were not really being treated fairly as far as those who worked so hard to produce them, and now they're going to be treated fairly."</p><p>Canadian officials had said the U.S. was at fault for producing too much dairy products.</p>Copyright laws
<p>The new deal features stronger restrictions on copyright infringement. It says that internet service providers (ISPs) shouldn't be held directly responsible when their users or companies traffick in pirated content—so long as they cooperate with copyright owners and law enforcement.</p><p>The agreement says there should be "legal incentives for Internet Service Providers to cooperate with copyright owners to deter the unauthorized storage and transmission of copyrighted materials or, in the alternative, to take other action to deter the unauthorized storage and transmission of copyrighted materials," the agreement reads, adding that ISPs can obtain legal protection (or 'safe harbor') by "adopting and reasonably implementing a policy that provides for termination in appropriate circumstances of the accounts of repeat infringers."</p>Ultimately a win for Trump
<p>Replacing NAFTA has long been a goal for Trump, who's called the longstanding trilateral deal a "<a href="https://www.theatlantic.com/international/archive/2018/08/trump-nafta/568654/" target="_blank">disaster</a>." And even though USMCA is more of an updated version of NAFTA than a completely new deal, the president arguably scored a few victories, and possibly some more supporters among American farmers and auto workers, by reaching the agreement just hours before Sunday night's deadline.<br></p><p>Still, USMCA will likely have little effect on the president's ongoing trade conflicts with China.</p><p>"We'll see what happens with China," Trump said. "We don't have a deal with China. There is no deal. They do whatever they want."</p>
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Map shows how the U.S.-China trade dispute is hurting American farmers
American farmers are expected to traverse a rocky financial road in the coming months.
19 September, 2018
Image: U.S. Department of Agriculture's Economic Research Service
- American farmers are seeing economic losses as a result from the U.S.-China trade dispute.
- Farmers of soybeans, which is the most imported U.S. crop in China, have been hit especially hard.
- All agricultural commodities are at risk.
<p>American farmers are suffering economic losses from a U.S.-China trade dispute that shows no signs of slowing down.</p><p>On Monday, the Trump administration announced plans for the U.S. to impose a 10-percent tariff starting Sept. 24 on $200 billion worth of Chinese goods, increasing to 25 percent on Jan. 1. The Chinese government responded a day later by announcing new tariffs on U.S. goods worth $60 billion. </p>
Losses across the country
<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8xODYzODI3OS9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYyMjg1MDQwMn0.lbbLfjbg6EG_N5ZXLpZQaqkt-6VsduP73WMqcDfL76w/img.png?width=980" id="6c299" class="rm-shortcode" data-rm-shortcode-id="21c3d3a84cd8c2b3c1dcc0e1245d0a4c" data-rm-shortcode-name="rebelmouse-image" /><p>A new map from the U.S. Department of Agriculture's Economic Research Service, which shows year-over-year changes in net cash farm income, illustrates how farmers in all regions of the U.S. are, in part, already losing money from the tit-for-tat retaliatory measures.</p><p>Each region of the country specializes in certain crops, for example:</p><ul><li>Basin and Range: beef and wheat</li><li>Heartland: soybeans and corn</li><li>Northern Crescent: dairy</li><li>Northern Great Plains: wheat, corn, soybeans</li><li>Prairie Gateway: wheat, corn, soybeans</li><li>Fruitful Rim: fruits, citrus fruits, vegetables</li><li>Mississippi Portal: cotton, soybeans, corn</li><li>Southern Seaboard: cotton, peanuts, rice</li></ul><p>"All of these commodity prices are linked together," Gary Schnitkey, Professor in Farm Management at the University of Illinois, told <em><a href="https://finance.yahoo.com/news/brutal-map-shows-u-s-farmers-want-trump-end-trade-war-123443562.html" target="_blank">Yahoo Finance</a></em>. "If soybean prices fall, so do corn and wheat."</p><p>American growers of soybean, which is the most-imported U.S. commodity in China, are expected to be hit hardest by the trade dispute. In 2017, China imported from the U.S. about 33 million tons of soybeans, which are used to feed livestock and make cooking oil. If China can find another source for its soybeans, <a href="https://www.bloomberg.com/graphics/2018-soybean-tariff/" target="_blank">such as Brazil</a>, the U.S. could see economic losses in the billions.</p><p>"On the U.S. side, farmers will suffer the most from the imposition of Chinese tariffs on U.S. soybeans," Loren Puette, director of Taiwan-based research firm ChinaAg, told <a href="https://www.dw.com/en/farmers-face-pigs-dinner-as-us-china-trade-spat-thickens/a-45559346" target="_blank"><em>DW</em></a>. "To have the Chinese market shut down for these farmers would be a major financial blow," Puette says.</p><p>Still, China would likely suffer in the transition, too.</p><p>"The annual loss in U.S. economic well-being would range between $1.7 billion and $3.3 billion," <a href="https://www.purdue.edu/newsroom/releases/2018/Q1/study-u.s.-soybean-production,-exports-would-fall-if-china-imposes-tariffs.html" target="_blank">said Wally Tyner</a>, an agricultural economist at Purdue University. "Chinese economic well-being also falls if they impose a tariff, in some cases as much or more than for the U.S. The reason for that is that soybean imports are very important to their domestic economy." </p><p>Some have suggested an additional reason why China is targeting soybeans: to turn soybean farmers, many of whom are based in red states, against President Donald Trump ahead of the midterm elections.</p><p>"With the midterm elections only a few months away, we would expect China to keep the pressure turned up," John LaForge, head of real asset strategy at the Wells Fargo Investments Institute, wrote in a note to clients. "But soon thereafter… we would expect to see some relief for U.S. soy prices and U.S. soy exporters."</p>
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