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What the USMCA Model Reveals about America’s Trade Policy

Author: Exports News
Sep 19, 2022
2 min read
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Sep 19, 2022
2 min read
What the USMCA Model Reveals about America’s Trade Policy

The USMCA is a free trade agreement (FTA) that remodeled the majority of NAFTA's provisions and consolidated existing trade between these parties by regulating it and removing specific objections. The USMCA includes financial services, digital trade, anti-corruption, and small and medium-sized enterprises (SMEs) to boost North America’s economic growth. More importantly, the US has more to gain from this FTA. Here’s how this agreement benefits the US economy:

USMCA Effects on US Economy and Trade

The US auto sector lost over 350,000 jobs since NAFTA came into effect in 1994, while Mexican auto sector employment increased to 550,000 from 120,000 workers within the same period. But the USMCA's increased protections for workers in Mexico to reduce cheap labor will increase job opportunities for US-based auto factories because wage gaps will decrease.

The USMCA will benefit American farmers, ranchers, and agribusinesses as the new agreement reduces barriers to importing agricultural products into the country. It will also increase access to highly protected Canadian dairy markets for Americans to sell their products in Canada without pricing provisions.

On the other hand, shifting the rule of origin (ROO) for the automobile industry from 62.5% to 75% will inevitably raise the price of automobiles within US markets and open up the economy to cheap car imports from Asia and Europe. Meanwhile, the intellectual property (I.P.) provision is a massive advantage for the US to partner directly with Mexico or Canada on pharmaceutical products and bypass China.

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The USMCA and America's International Trade Policy

The Trans-Pacific Partnership has revealed that America's international trade policy continues to improve on fostering an open and rules-based global trading system and enforcing trade commitments and related laws.

The USMCA has created an open and leveled playing field for American workers by introducing an improved rule of origin for automobiles, trucks, and other automotive products to the detriment of America's automobile industry. It has also made sure the trading partners honor trade commitments by making Canadians and Mexicans open up their markets to American farmers, ranchers, and agribusinesses and reducing lawsuits on trade-related issues.

Moreover, the agreement has raised the bar on necessary labor standards as it requires all three countries to adopt and implement bans on importing goods made with forced labor. It has ushered in digital trade for FTAs as well, supporting a twenty-first-century economy and ensuring opportunities for trade in US services. This means that agreements can be ratified and re-negotiated to capture current realities and economic situations.

The USMCA is far from perfect but ultimately promotes a more balanced, work-centered trade model and workers' rights for America's global trade policy.

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