United States-Mexico-Canada Agreement (USMCA)

•  Canada has agreed to sign a trade deal with the United States and Mexico, revamping the North American Free Trade Agreement after almost a year of negotiations. The new deal has been named the United States-Mexico-Canada Agreement (USMCA).
• The trilateral pact is expected to be signed by the three North American countries before the end of November, after which it would be submitted to Congress.

About UMSCA:

• This part of the deal allows for independent panels to resolve trade disputes that arise out of the deal. It was a red line for Canada, which feared not having an objective arbiter, despite the U.S.’s push for changes.
• Under the USMCA trade deal, online cross-border shipments to Canada worth less than $150 will no longer be subject to duties. The deal raises the raises the minimum purchase price that qualifies for duties and taxes, known as the de minimis threshold, up from $20 to $40.
• The new deal also has new measures the government says will help Canada’s natural resources sector; as well as a new environment chapter with measures related to air quality and marine pollution.
• The deal includes stronger rules of origin for autos, and an “ambitious” slate of other provisions related to the digital age.
• It includes a termination provision aimed at preventing the deal from becoming outdated. It states that the deal is good for 16 years after it comes into force, but within the first six years a mandatory “joint review” will be conducted to determine whether all three countries want to extend the agreement for another 16 years. It maintains the six month opt-out of the deal notice that existed in NAFTA.
• The investor-state dispute settlement process (ISDS) is also being phased out between Canada and the United States, which Freeland said has cost Canadians millions in legal fees.
• The exchange of steel and aluminum tariffs between Canada and the U.S. remain in place for now, though the federal government is indicating that with the new deal momentum, they’re hopeful that the tariffs could be lifted before the deal is signed.

About NAFTA:

• The North American Free Trade Agreement is a treaty between Canada, Mexico and the United States.
• NAFTA grants the most-favored-nation status to all co-signers. That means countries must give all parties equal treatment. That includes foreign direct investment. They cannot give better treatment to domestic investors than foreign ones. They can't offer a better deal to investors from non-NAFTA countries.
• Governments must also offer federal contracts to businesses in all three NAFTA countries.
• NAFTA eliminates tariffs on imports and exports between the three countries. Tariffs are taxes used to make foreign goods more expensive. NAFTA created specific rules to regulate trade in farm products, automobiles and clothing. These also apply to some services, such as telecommunications and finance.
• Exporters must get Certificates of Origin to waive tariffs. That means the export must originate in the United States, Canada or Mexico. A product made in Peru but shipped from Mexico will still pay a duty when it enters the United States or Canada.
• NAFTA establishes procedures to resolve trade disputes. Chapter 52 protects businesses from unfair practices. The NAFTA Secretariat facilitates an informal resolution between the parties. If this doesn't work, it establishes a panel to review the dispute. That helps all parties to avoid costly lawsuits in local courts. It helps the parties interpret NAFTA’s complex rules and procedures. These trade dispute protections apply to investors as well.
• All NAFTA countries must respect patents, trademarks, and copyrights. At the same time, the agreement ensures that these intellectual property rights don’t interfere with trade.

By: Vishal