What we got with USMCA and what it does for the US: Overview:
Most of the changes are not big deals with the exception
Automobiles coming from Mexico or Canada must have 75 percent of their components manufactured in Mexico, the US, or Canada to qualify for zero tariffs. Why was that important? It keeps companies like Chinese firm Geely from contracting to produce significant amounts of a car’s components and in effect using our market to finance their tariff protected operations which build cars in China. This is also a back door for firms like Geely to steal technology. I encourage anyone who wants to understand how Chinese firm’s work to steal core technology through part production please read how Schwinn bike was replaced by Giant Bike as the largest manufacturer of bikes in the world. Many would argue the ‘playbook’ for Chinese IP theft was born in that deal.
About 45 percent of automobile parts have to be made by workers who earn at least $16 an hour by 2023. Why is this important? This removes the incentive for American companies to move production to Mexico to dodge American labor costs. Libertarians will argue it increases the cost of automobiles and protectionists will argue that it keeps high paying jobs in the United States. Those of us in the middle will note that many industries including the manufacturing of plastic components moved to Mexico to dodge environmental regulations as well as labor costs but then sold tariff free back in the United States. Net effect consumer saved a few dollars, good wage manufacturing jobs left the country and our neighbor country becomes a polluter of natural resources.
US farmers get more access to the Canadian dairy market. It appears that otherwise agricultural trade was not impacted a great deal. Canada is a big producer of ag products like canola and spring wheat and badly needed this deal to not cripple their ag market. 10,500 dairy farmers literally held Trudeau hostage until even with their very effective lobby he could not hold out any longer.
Intellectual property and digital trade: The deal extends the terms of copyright and in particular it cracks down on pharmaceutical drug issues between the three countries. Why is this important? American drug companies are THE source for most new drug breakthroughs but Canada and Mexico would simply start producing generics. Big Pharma is not particularly a group I like but I have to point out that because they could not recover costs of research when they are undercut by generics with no remuneration they are not incentivized to find new and better drugs. Why spend billions on research when you can just steal a new drug when it comes out and proves to be effective? This should allow companies to recover investment via sales in Mexico and Canada they could not get before.
A number of key additions but other than IP the improvement on digital economy are the biggest NEW area of coverage: It including prohibiting duties on things like music and e-books, and protections for internet companies so they’re not liable for content their users produce.
No section 232 tariff protections: Section 232 is a trade loophole that Trump has used to impose steel and aluminum tariffs on Canada, Mexico, and the European Union. Both Canada and Mexico wanted protections from these tariffs, but they didn’t get them. Why is this important: Plain and simple this is a HUGE sovereignty issue. I would ask those ‘free traders” to do a bit of internet research. Go look at Chinese steel production and then add up the G-20 countries TOTAL production. China produces as much as the rest put together which if you consider their openly discussed goal to be the world power in 20 years should scare the heck out of you. You want a Chinese COMMUNIST government in control of your steel production for airplanes, ships, tanks etc.? I understand many youngsters do not realize that America basically won WW2 on the back of our industrial might. I would suggest one research Mexican and Canadian steel production and then look at how much they exported to the United States. One would think they manufacture NOTHING in their countries based on that but part of what was really happening was China was ‘back dooring’ steel into the US to avoid tariffs using our ‘friends’. (note: this was a common scenario in a number of areas which were used by both China and the EU. There is a number of minor provisions in USMCA designed to limit that abuse)
The deal is also subject to a review every six years, at which point the US, Mexico, and Canada can decide to extend USMCA. Why is this important? In the technological age things change so fast that the old agreement was far too long and open ended. This allows us to react much quicker WITHIN the agreement i.e. we can address individual items without a whole meltdown of the agreement
