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U.S.-Mexico-Canada trade deal brings NAFTA into 21st century

July 03, 2019
American, Mexican and Canadian lawmakers will soon have an opportunity to vote on a massive trade deal that replaces the quarter-century-old North American Free Trade Agreement.

If those lawmakers ratify the new United States-Mexico-Canada Agreement (USMCA), it'll create good jobs in all three countries. Workers in industries as disparate as agriculture, auto manufacturing, software and television would earn higher wages. And consumers would benefit from better, more affordable products.

NAFTA removed numerous barriers to trade and business development. Today, the deal is responsible for more than $1.2 trillion in trade among the United States, Mexico and Canada each year.

But the global economy has changed since NAFTA went into effect in 1994. Amazon didn't exist. Many people hadn't heard of the internet. As a result, NAFTA contained few provisions related to e-commerce. Businesses in all three countries are so keen for a 21st-century trade deal.

USMCA fits the bill. The deal maintains NAFTA's most successful provisions but incorporates critical improvements.

Consider USMCA's section on agriculture. In 2017, the United States exported $24 billion and $19 billion worth of agricultural products to Canada and Mexico, respectively. These two countries represent America's largest and third-largest agricultural markets in the world. And these exports support 325,000 American jobs.

USMCA maintains zero tariffs on agricultural products for all three nations, which helps farmers cheaply ship goods across borders. That will protect farming jobs in Mexico and lower Americans' grocery and restaurant bills.

USMCA would boost job creation and wage gains for auto manufacturing workers, as well. The deal requires 75 percent of a vehicle's parts to be manufactured in North America to qualify for tariff-free treatment. That's up from the current requirement of 62.5 percent. This provision will foster job growth in all three nations.

Recognizing the integral role of mom-and-pop shops, USMCA devotes an entire chapter to small and medium-sized businesses. The chapter includes provisions that cut down on the paperwork for express shipments valued below $2,500 and eliminates duties and tariffs on all shipments up to 40 Canadian dollars ($30). Lower costs and fewer administrative hassles will increase revenues, allowing firms to raise wages and hire new workers.

Purveyors of digital products, such as films, software, music and e-books, will also get a boost from USMCA. The deal exempts these goods from custom duties. As a result, businesses in IP-intensive industries — which support about 30 percent of jobs in the United States — will face fewer barriers when selling their products across North American borders.

USMCA is a victory for workers and consumers. Let's hope lawmakers ratify the deal as soon as possible.

Maryscott Greenwood is the CEO of the Canadian American Business Council.

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