USMCA another step closer after amendments are signed - what does this mean?

Legislation | | MIC Customs Solutions |

The US is almost ready to ratify the USMCA free trade deal, so what's next for the agreement?

At a new ceremony, amendments to the free trade agreement (FTA) between the US, Mexico and Canada - otherwise known as the USMCA - have been signed, paving the way for the deal to be officially ratified.

The event was attended by Mexican president Andres Manuel Lopez Obrador, Canadian deputy prime minister Chrystia Freeland, US trade representative Robert Lighthizer and US president Donald Trump's son-in-law Jared Kushner, with onlookers told USMCA is now effectively a done deal.

Finally moving forward

This comes after the agreement was originally signed back in November 2018 as a side event of the G20 Summit in Buenos Aires.

Although the FTA is still awaiting a vote in the US House this week, it is expected the Senate will take it up in January 2020.

Mr Lighthizer said it was a "miracle" that the three sides had come together and that it highlights the benefits of the agreement.

There had been a slight hiccup earlier this month, when Mexico's undersecretary for North America Jesus Seade rushed to Washington for an emergency meeting concerning amendments the US had made on labour reform.

A new clause suggested five inspectors from the United States Department of Labor would be stationed in Mexico as part of the deal, but Mexican officials insisted they had not been consulted on this.

However, the hitch proved to be a misunderstanding and Mr Seade later told reporters he was "very satisfied" with the agreement, including its revised terms.

The new progress is likely to be viewed as a major victory for Mr Trump, who sparked a renegotiation of the existing North American Free Trade Agreement (NAFTA) during his first year in office.

After he called it "the worst deal ever", Canada and Mexico reluctantly agreed to join the negotiations in order to save the relationship with one of their biggest trading partners.

When Mr Trump finally reached a deal with the House Democrats this month, he said USMCA would be "a terrific deal for all of us".

What's in USMCA?

The new FTA aims to keep the majority of trade between the three nations tariff-free, as well as taking into consideration digital trade, labour and the environment.

One major feature is that it makes the Canadian dairy market more open to US farmers. Mr Trump had previously complained that Canada charged high tariffs on US dairy products, but this means American farmers will be able to sell more to Canadian customers.

Another significant point is that USMCA requires 75 per cent of a car's parts to be made in North America in order to remain free from levies, up from 62.5 per cent in NAFTA.

Meanwhile, Canada and Mexico can continue to send roughly the same amount of vehicles and parts free of charge. Only parts above that quota will be charged - and there is a guarantee this will not be affected by future automotive tariffs.

Further provisions made include new regulations on e-commerce, which was only in its infancy when NAFTA was drawn up, and the elimination of patent provision for biologic drugs.

Otherwise, much of the detail originally seen in NAFTA has been retained by the new deal.

Under the terms of USMCA, the three nations will review their new arrangement six years after it officially comes into force. If there are no changes, it will continue for its full 16-year term. By that time, it will have almost reached the same age as its predecessor.