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NAFTA: US’s New Trade Agreement

NAFTA: US’s New Trade Agreement

Here, we dive into what shippers need to know about the new NAFTA (now known as the USMCA).

NAFTA: US’s New Trade Agreement and What You Should Know

Shipping across borders can be confusing, tedious, and time-consuming, especially when running your business. And with new government policies now in place and often changing, it’s more important to understand how these changes could affect your business and your shipping strategy. Here, we dive into what shippers need to know about the new NAFTA (now known as the USMCA).


NAFTA: US's New Trade Agreement

What Is NAFTA?

The North American Free Trade Agreement, or NAFTA, was created and implemented in 1994 to help eventually eliminate most tariffs and barriers to trade on services and products between Canada, the United States, and Mexico. The agreement aimed to foster free trade relationships among these North American countries. The most notable items where tariffs faded out included automobiles, clothes, textiles, and agricultural products.


What Is the New NAFTA?

The new NAFTA is called The United States-Mexico-Canada Agreement or USMCA, replacing the old NAFTA. As stated in a USMCA Fact Sheets, “Canada and Mexico are our first and third largest export markets for United States food and agricultural products, making up 28 percent of total food and agricultural exports in 2017. These exports support more than 325,000 American jobs.”

Additionally, the United States imports many goods from Mexico and Canada. In 2018, Mexico was the United States’ second-largest supplier of imported goods, totaling an estimated $671.1 billion in trade, with imports to the U.S. making up $371.9 billion of the total amount.

Some of the most imported Mexican items included vehicles, electrical machinery, general machinery, agricultural products, mineral fuels, and optical and medical equipment.

Canadian imports in 2018 were also high, with Canada being the third-largest supplier of imported goods. Imports from Canada totaled $318.8 billion in 2018. Some of the most notable Canadian imports include agricultural products, snack foods, red meats, vegetable oils, processed fruits, and vegetables, as well as fresh vegetables.

Additionally, some Canadian services imported to the U.S. included travel and transport services, telecommunications, and computer and information services.

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The USMCA has updated features. The updates’ goal is to benefit the United States, Mexico, and Canada mutually.

The USMCA has updated features. The updates’ goal is to benefit the United States, Mexico, and Canada mutually.

Some of the important features of the USMCA include:

  • It is a free trade agreement between the United States, Mexico and Canada.
  • It is replacing the NAFTA, which was in effect since 1994.
  • The UMSCA took effect as of July 1, 2020.
  • In 16 years, the UMSCA will expire if not renewed between the countries.
  • The UMSCA has updated provisions and features.

Additional key features in the USMCA include:

  • Intellectual property will be under stronger protection and will have more enforcement of intellectual property rights.
  • Digital trade and eCommerce will be under greater scrutiny.
  • De minimis shipment value levels will increase.
  • Labor will have increased value, and new trade rules of origin will deliver higher wages to laborers.
  • Environmental impacts chapter of the agreement will be more detailed and comprehensive.

For those interested in reading the complete USMCA trade agreement, click here. Additionally, if you want to look through some frequently asked questions about the USMCA, click here.

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