The Canada-United States-Mexico Agreement (CUSMA) Comes into Force on July 1, 2020
After months of negotiations and delays, the Canada-United States-Mexico Agreement (CUSMA) finally comes into force on July 1, 2020. CUSMA, also known as the United States-Mexico-Canada Agreement (USMCA) in the United States and the Tratado entre México, Estados Unidos y Canadá (T-MEC) in Mexico, replaces the North American Free Trade Agreement (NAFTA) that was in effect for over 25 years.
So, what are the key features of CUSMA? Here are some highlights:
1. Increased Regional Content Requirements: CUSMA increases the regional content requirement to 75% from the current NAFTA requirement of 62.5% for a vehicle to qualify for duty-free trade. In addition, the agreement stipulates that 40-45% of a vehicle must be produced by workers who make at least $16 an hour.
2. Expansion of Intellectual Property Provisions: CUSMA expands intellectual property provisions, including protections for biologic drugs, patent term extensions for new drugs, and stronger protections for trademarks and copyrights.
3. Strengthened Labor and Environment Provisions: CUSMA includes new labor and environment provisions that aim to strengthen worker rights and environmental protections. The agreement requires Mexico to make significant changes to its labor laws, including allowing workers to form independent unions and making it easier for workers to vote on collective bargaining agreements.
4. Opening Up Canadian Dairy Market: CUSMA opens up the Canadian dairy market to increased market access for U.S. dairy products, which has been a longstanding issue for U.S. dairy farmers.
5. Sunset Clause: CUSMA includes a sunset clause, which means that the agreement will expire after 16 years unless all three countries agree to extend it.
In addition, CUSMA includes provisions related to digital trade, e-commerce, and the protection of personal information. The agreement also contains a dispute resolution mechanism to address potential violations of the agreement.
Overall, CUSMA is a modernized trade agreement that addresses some of the shortcomings of NAFTA and reflects the changing needs of the North American economy. While there has been some criticism of certain provisions, including the increased regional content requirement, many stakeholders view the agreement as an improvement over the previous NAFTA. With the agreement now in force, it remains to be seen how it will impact trade and economic relations between the three countries in the years ahead.