The recent United States-Mexico-Canada Agreement (USMCA) has been making headlines since it was signed in November 2018. This agreement replaces the 25-year-old North American Free Trade Agreement (NAFTA) and brings with it many changes for Canada.
One of the most significant changes is the new rules of origin for the automotive industry. Under NAFTA, 62.5% of a vehicle`s content had to be made in North America to qualify for duty-free access. Under USMCA, this requirement has been raised to 75%, with 40-45% of the content required to be made by workers earning at least $16 per hour – a move aimed at boosting wages for workers in the auto industry.
Another major change is the opening up of the Canadian dairy market. Under USMCA, American dairy farmers will be granted greater access to the Canadian market, with an increase in the market access for U.S. dairy from 3.25% to 3.6%. This has been a contentious issue for Canadian dairy farmers who have been protected by supply management regulations under NAFTA.
USMCA also includes provisions related to intellectual property, labor standards, and environmental protections. For example, it requires Mexico to pass labor reforms that allow workers to form unions and bargain collectively, with the aim of reducing the wage gap between Mexico and the U.S. and Canada.
Overall, the new agreement is expected to bring benefits and challenges for Canada. It provides greater certainty and stability for Canadian businesses, as well as increased access to the Mexican market. However, it also includes provisions that could lead to increased competition from the U.S. in areas such as dairy and poultry.
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