What are the USMCA’s biggest wins?
February 5, 2020
- USMCA was officially signed into law on Wednesday, January 29th
- Phase 1 of a new trade deal with China was signed on January 15th
- Are there other trade deals on the horizon?
13 months of negotiations, more than a year of waiting for Congress’ approval, and we finally have a new trade deal with Canada and Mexico. USMCA officially sent NAFTA into the dustbin of history on January 29th, 2020.
The state of U.S. trade is strong, and growing stronger with each new trade deal.
What kind of impact will USMCA have?
The benefits are clear. According to Real Clear Politics, USMCA will add “$68 billion to economic growth and generate 176,000 jobs over six years.”
One of the USMCA’s biggest wins is what it accomplishes for the auto industry. Under the new deal, every car sold in North America must have at least 75 percent of its parts made in North America (sorry Germany and China). Plus, at least 40 percent of vehicles must originate in places where workers earn at least $16 an hour.”
Under NAFTA, automakers moved operations south of the border where they could pay workers much lower wages. But thanks to new rules in the USMCA deal, companies are incentivized to remain in the U.S., which will bring back some of the 350,000 auto sector jobs that were lost over the last 25 years.
Not just the auto industry
In addition to benefits for autoworkers, USMCA also helps dairy farmers sell more milk to Canada. Other small changes include longer patent protections for U.S. pharmaceutical companies and an extension to copyright terms.
USMCA officially lasts for 16 years, but the deal can be revisited in 2026 and extended for longer if each country agrees to do so. While the new deal is a win for the manufacturing and agricultural industry, it could also serve as a blueprint for future trade deals with other countries.
Then there’s China
As if drafting an entirely new trade agreement with Mexico and Canada wasn’t enough, we’re also more than 18 months into trade negotiations with the world’s second-largest economy: China.
The Trump administration has been negotiating since 2018 to get China to stop stealing our intellectual property because China is notorious for forcing companies to share trade secrets in order to access the Chinese market. After more than 500 days of negotiations, $500 billion in tariffs on Chinese imports, and $185 billion in tariffs on U.S. imports, the world’s two largest economies have come to a partial phase one agreement.
On January 15th, the U.S. and China signed phase one of a comprehensive trade deal. China will purchase 40 percent more U.S. goods and services in 2020 than it did in 2017, and 65 percent more by 2021. They also “pledged not to force US companies to hand over their technology in exchange for access to its market.”
Phase two of the deal is currently being negotiated.
The U.S. has trade relations with more than 75 countries around the world. Canada and Mexico may be the closest, and China may be the most stubborn, but there are plenty of improvements that can be made with other nations.
We may see a new trade deal with the UK now that they have left the European Union. The U.S. administration promised tariffs on French goods after France passed a new tax on U.S. tech companies. Tensions in the Middle East could impact trade deals with our South and Central Asia trading partners. And who knows what may happen tomorrow.
The bottom line
The current administration has proven that a slow and steady approach to new trade deals, negotiated for a year or more, taken one country at a time, is a smart approach that ends well for American paychecks. First USMCA, then China, next: Europe?