JAKARTA (TheInsiderStories) – After some tough negotiations Canada had finally decided to join a new trade deal with the United States (US) and Mexico which will replace the North America Free Trade Agreement.
The new trade deal, named United State-Mexico-Canada Agreement (USMCA), will give hopes that multilateral trade system remains the mainstay amid escalating trade war.
US’s President Donald Trump has negotiated a new USMCA, which will benefit American workers and businesses where North American Free Trade Agreement (NAFTA) has failed, he said in a written statement on Oct. 1.
Trump said his Administration has secured a preliminary US–Mexico Trade Agreement that modernizes and rebalances the trade relationship to reflect the realities of the 21st century on August 28.
However, Trump insisted that the trade deal will not be a new NAFTA, which the controversial businessman seeks to terminate since taking office. While there are details to be meted out, the deal could send a signal that Trump is wiling to reach a compromise with regards to trade issues.
This is a positive development for market participants, who are nervous with the escalation tit-for-tat trade tariffs between the US, China and the European Union.
He believed, this agreement will create more reciprocal trade that grows the economy, supports high-paying jobs for American workers, and protects American intellectual property. New “rules of origin” requirements to incentivize billions a year in vehicle and automobile parts production in the US and will supporting high-wage jobs.
He continued, the 24-year-old NAFTA was outdated and unbalanced, hurting American jobs and businesses. Many Americans have been hurt by closed factories, exported jobs, and broken political promises resulting from the old NAFTA.
So far, NAFTA has contributed to US’s ballooning annual goods trade deficit, which grew from US$115 billion in 1993, the year before NAFTA’s implementation, to nearly $800 billion in 2017. The US went from a $1.6 billion goods trade surplus with Mexico to a $70 billion goods trade deficit during that same time period.
Trump explained, the old NAFTA includes many outdated provisions that have not been updated to reflect modern standards, new technologies, or the 21st century global economy.
He continued, American auto manufacturers and workers will benefit from new rules of origin requiring 75 percent of auto content to be produced in North America. The new agreement also will incentivize billions of dollars in additional US vehicle and auto parts production, added by Trump.
Workers will also benefit from rules that will incentivize the use of high-wage manufacturing labor in the auto sector, supporting better jobs for American workers.
Furthermore, he stated, Canada will eliminate its “Class 7” program that allows low-priced dairy ingredients to undersell American dairy products. And, Canada will provide new access for American dairy products, eggs, and poultry.
USMCA also contains the strongest measures on digital trade of any agreement. This includes rules to ensure data can be transferred cross-border and to minimize limits on where data can be stored.