The Line between USMCA and NAFTA: A Tier 2 Companies’ Perspective

The Line between USMCA and NAFTA: A Tier 2 Companies’ Perspective
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The Line between USMCA and NAFTA: A Tier 2 Companies’ Perspective
USMCA bears considerable similarities with while still differing markedly from its predecessor – NAFTA. The first difference regards car manufacturing. Under USMCA, North America will be required to produce 75% of all automobiles for the same market as the condition for avoiding tariffs;40 percent of the chunk will be reserved for automakers paying an average wage of $16/hour. On the other hand, NAFTA required that North America produce62.5 percent of all automobiles sold in the trade zone (Donnan, Mayeda, Leonard, & Lin, 2018). Additionally, it had no minimum wage requirement. Another contrast is that the new trilateral trade agreement opens up Canada’s dairy market. Notably, NAFTA did not provide any guidelines for opening the milk market for foreign competition. For quite a long time, the U.S. had complained about Canada’s system of domestic quotas that rendered it difficult for foreign dairy products to compete fairly.
NAFTA had no currency chapter, but USMCA includes a currency chapter obligating the three partners to maintain market-determined exchange rates. As Donnan and colleagues (2019) note, the same clause further requires the three countries to desist from competitive currency devaluations. The final point of difference is sunset clause. NAFTA lacked an automatic sunset clause. To pull out, a member had to give six month’s withdrawal notice. USMCA, on the other hand, is scheduled to be effective for 16-years, and the agreement can be reviewed after six years for perfection purposes and a possibility of extension.
The only notable similarity emanates from provisions for dispute resolution in both agreements. Chapters 19 and 20 have remained unchanged in the new deal as they were in NAFTA (Donnan et al., 2018). While the former allows for cross-border mediation in the event of dumping and subsidy clashes among trade partners, the latter governs disput...