In this file:
· NAFTA’s successor is about to take effect. Here’s why it will be good for North America—and bad for the WTO
· USMCA Takes Effect July 1, 2020
NAFTA’s successor is about to take effect. Here’s why it will be good for North America—and bad for the WTO
by Hung Tran, New Atlanticist
Atlantic Council - Jun 29, 2020
Tran is a nonresident senior fellow at the Atlantic Council and former Executive Managing Director at the Institute of International Finance.
The United States-Mexico-Canada Agreement (USMCA) will take effect on July 1, 2020, replacing the North America Free Trade Agreement (NAFTA). The USMCA features several important changes while maintaining trade flows worth $1.2 trillion among the three-member countries.
It is the latest of the 303 regional trade agreements (RTAs) currently in force—whose rank is likely to increase in the foreseeable future. The RTAs have hollowed out the World Trade Organization (WTO), and this process is likely to accelerate going forward. About half of world trade is now covered by the RTAs, reducing the scope and relevance of WTO rules and tariff schedules, as well as its dispute settlement and appeal mechanism.
If the USMCA is used as a template for future US trade negotiations, that would hasten the regionalization of world trade, fragmenting the global trading system based on the WTO and marginalizing the organization.
Below are key features of the USMCA, most of which are new in a US trade agreement.
Auto parts rules of origin: raising the threshold from 62.5 percent to 75 percent (and 70 percent for steel and aluminum used in making parts).
Use of quota: while being frowned upon by the WTO, the USMCA contains side letters to exempt 2.6 million passenger vehicles each from Canada and Mexico from potential Section 232 tariffs (of the US Trade Expansion Act of 1962, threatened by the United States on national security ground) on an annual basis, and roughly current annual volumes of auto parts.
New labor requirements: 40 to 45 percent of auto parts must be made by workers earning at least $16 per hour by 2023—to be more comparable to the US average wage levels in this sector. Mexico has also passed labor reform law promoting the unionization and collective bargaining rights of their workers.
Agricultural markets: US farmers can have better access to Canada which has agreed to raise its tariff-free quotas on dairy, poultry, and egg products under its supply management regime.
Digital trade: for the first time, there is a full chapter on free digital trade in an FTA. The chapter prohibits import duties and other charges on electronically transmitted digital products; discriminatory treatment of cross-border data transfers; and forced data localization.
Dispute settlement: state-to-state disputes regarding a matter which arises under this agreement, or under another international agreement, including the WTO agreement, to which the disputing parties are party, are to be settled in a forum selected by the complaining party—giving it a choice of forum most favorable to its position, instead of automatically referring WTO disputes to the WTO dispute settlement system. Furthermore, if the formation of the arbitration panel (in a chosen forum) is being blocked by noncooperative responding parties, the USMCA Implementation Act (US Public Law 116-113) allows the United States to use its domestic laws to impose safeguards on any surges in imports from Canada and Mexico.
Dealing with state-owned enterprises (SOEs) and subsidies: requiring SOEs to compete on commercial basis and that any advantages such as subsidies enjoyed by the SOEs do not have adverse effects on US companies and workers. These provisions are more comprehensive than the WTO’s rules on subsidies and countervailing duties.
Dealing with a non-market economy: any member wanting to negotiate a free trade agreement with a non-market economy (as defined by a member—primarily aiming at China) has to keep other members informed; and upon conclusion of such agreement, the other members can withdraw from the USMCA with a six month notice.
Including a chapter on currency manipulation: this is the first time currency manipulation is included in a trade agreement. Traditionally, currency issues are dealt with by the US Treasury, normally in consultation with the International Monetary Fund (IMF) and its members.
Potential impacts of the USMCA ...
USMCA Takes Effect July 1, 2020
by: Gibney Anthony & Flaherty, LLP
via JDSupra - June 19, 2020
The United States-Mexico-Canada Agreement (USMCA) will take effect on July 1, 2020. The USMCA replaces the North American Free Trade Agreement (NAFTA), which expires on June 30, 2020.
From an immigration perspective, the USMCA represents a repackaging of NAFTA. The USMCA retains key immigration benefits of NAFTA, including provisions allowing for the temporary entry without quotas of Business Visitors, Traders and Investors, Intracompany Transferees, and Professionals. With respect to Professional workers, USMCA retains all of the occupations previously designated as eligible for the NAFTA “TN” visa, though the new agreement does not add any additional occupations.
Implementation of the USMCA does not alter the temporary travel restrictions currently in effect at the U.S., Canadian and Mexican land borders, stemming from the coronavirus pandemic. Admission restrictions for non-essential business travel will remain in place until at least July 21, 2020. U.S. Customs and Border Protection officers may still adjudicate immigration benefits applications filed under the USMCA...