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New NAFTA/ USMCA: Refreshing The World's Biggest Trade Agreement

Posted on Thu, Dec 6, 2018

The North American Free Trade Agreement was historic in its scope and benefit to Canada, The US and Mexico. If the New NAFTA (CUSMA) is considered historic it will be for affirming the value of a decades old free trade agreement in a time of increased protectionist rhetoric.

After 20 + years and countless political attacks, the value of NAFTA to North American countries has been officially recognized (if not yet officially confirmed).

 

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Jet Worldwide provides parcel delivery solutions to NAFTA countries taking advantage of LVS, ECCF and parcel import processes to Mexico.

 

 

 

What is NAFTA/ USMCA/  CUSMA / T-MEC?

Before going a little bit deeper, I thought it useful to first layout the fundamental premise of the agreement.   Trade agreements can be incredibly complex and NAFTA is no exception.

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The basic of concept of the NAFTA/ CUSMA is simple: 

 

Anything grown (agriculture), raised (cattle, poultry) or manufactured in North America (Mexico, Canada and the US) can be entered duty free to other North America countries.

 

 

 

What is it about the name?

To score the political points, the name was changed from NAFTA (you cannot appear to win by essentially updating an old agreement so a name change was needed).

 

  • The USA:   USMCA (putting US first)
  • Canada :   CUSMA (putting Canada first)
  • Mexico:   T-MEC (putting Mexico first and reducing the USA and Canada letters from 2 to 1.   (E= Estados Unidos)

 

The fight over the new name  reflects the reality of emotionally charged politics that can over ride the pragmatism of this trade agreement.     For simplicity, we prefer to call it simply  "New NAFTA."

 

 

 

What is historic is that NAFTA has been reaffirmed.

The big deal about the New NAFTA agreement is that it renews the old NAFTA.   

 

While are still some jitters about final ratification, there is also a sense of relief that the core NAFTA provisions have been preserved.

 

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 The architects and visionaries of the original NAFTA should be congratulated. 

After over 2 decades and despite extreme political rhetoric,  the value of the agreement has been affirmed by a new agreement that maintains NAFTA's core principles.

 

The "biggest and best" part about the new NAFTA agreement is that it upholds the core principles of the original agreement!   

 

 

New NAFTA:  What Changes?

Here are some notable changes in the New NAFTA:

  • The U.S. gained more access to the Canadian dairy market, similar to what was agreed by Canada in their European and Asian trade pacts ( Europe/CETA Asia/ CPTPP).
  • The Chapter 19 dispute settlement system was preserved.
  • Agreement to not subject digital sales to duties and agreeing to some data localization requirements.
  • The de minimis thresholds express shipments to Canada increased (but the Canadian and Mexican de minimis levesl remain much less than the $800 US American de minimis*).  
  • There is a standard agreement on regulatory co-operation subject to dispute settlement, which goes beyond CPTPP and CETA.
  • The 2010 Canada-U.S. Agreement on Government Procurement remains in effect

 

 

 

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* Note on USA de minimis:  The $800 de minimis level allows duty free importation of direct on-line international orders to the US market.     This level applies to Express Consignment Clearance processes only (Part 128 of the Code of Federal Regulations).

 

 

 

 

 

 

Implementing the New NAFTA: Not yet a done deal

Following the signature of all three leaders recently in Buenos Aires, the agreement now requires legislative approval in all three countries. Final implementation is expected but certainly far from guaranteed.

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American Approval:

  • Newly elected US congress sits January 3 and will need to put approval of USMCA on the legislative agenda.
  • The Trump administration must submit a list of changes to US law needed to accommodate the passage of USMCA by January 30.
  • A final draft of the actual legislation (typically is a joint effort between Congress and the Executive Branch) must be submitted to Congress by the President together with a Statement of Administrative Action 30 days prior to submitting implementing legislation to Congress, along with other key supporting documentation.
  • The US International Trade Commission has 105 days from the signing (March 2018) to present its economic assessment of the agreement.

 

With all those IF’s…..

The US could Approve USMCA in October, 2019

  • The implementation bill will be introduced in the House and Senate in mid-April. US Trade Promotion Authority rules require that Congress act on the bill within 90 days, suggesting a mid-July vote. If Congress approves, CUSMA could be signed into law before the end of July, ahead of the October 21 final deadline for the next Canadian federal election.

 

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Jet Worldwide can assist international companies to gain cross border e-commerce access via Section 321 processes to the USA, LVS clearance in Canada and high volume parcel import processes to Mexico.

 

 

Mexican Approval:

The incoming Lopez Obrador Administration in Mexico creates somewhat of an unknown in Mexico. But the ultimate economic benefit is expected to win the day as a disruption of inbound foreign investment would negatively affect the new administration's other legislative goals.

 

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Canadian Approval:

There are some in Canada who feel too much was given.   With the US keeping their steel and aluminium tariffs and Canada providing greater US access to their dairy sector,  some Canadian legislators are not fully embracing the new agreement . In addition, the ongoing softwood lumber battles under the old NAFT remain unresolved.

 

 

The Canadian passage /”royal assent” is expected to survive the aforementioned concerns with approval before the federal election deadline of October 21.

 

 

 

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Political Rhetoric and Economic Reality

Virtually all leading economist say that free trade helps the world. The more a country is open to free trade, the stronger its economy is likely to be. Of course, the theory of free trade also comes up against the stark reality of lost jobs and the demise of entire industries and fear of unfair competition.

 

Free trade is somewhat of a misnomer as trade is never entirely free, even without duty. In fact, the cost of duty is often less than the administrative cost of having to adhere to a labyrinth of confusing regulations.

 

 

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CONTACT JET'S TEAM

FOR PARCEL DELIVERY TO THE USA, CANADA AND MEXICO

 

 

 

North America: A Special Free Trade Zone

Canadians, Mexicans and Americans citizens generally do not think of themselves as "North Americans" but sharing a closer a connection to your neighbours seems like a good thing.

 

 

For over 2 decades, NAFTA has enabled stronger cultural, civic and political connections between all three countries. And taking a step of confirming the value of  NAFTA, no matter the name, is a great thing for North America.

 

 

 

 

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