The New NAFTA: The United States-Mexico-Canada Agreement (USMCA)

Author:Mr Curtis Dombek and Lisa C. Mays
Profession:Sheppard Mullin Richter & Hampton
 
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A tripartite agreement to save the North American Free Trade Agreement (NAFTA) has just been reached. Since June 2017, the United States, Canada, and Mexico have been renegotiating NAFTA. After over a year of negotiations, late on Sunday night, September 30, 2018, Canada agreed to sign the revised agreement. That agreement is called the United States-Mexico-Canada Agreement, or USMCA.

How an agreement was finally reached

The USMCA involves Canada opening up dairy access beyond what Trans-Pacific Partnership (TPP) would have achieved, allowing President Trump to claim victory on that point; all in exchange for retaining an NAFTA Chapter 19 dispute process to review antidumping and countervailing duty (AD/CVD) orders and special rules on films and publications for Canada's francophone population.

Key points of the USMCA

The USMCA text has just been released. The devil, as always, is in the details. We provide a brief summary of key points below:

Automotive. The existing auto production capacities of Canada and Mexico will be excluded from President Trump's threatened Section 232 aluminum and steel tariffs. That current capacity is 2.6 million autos from each country. We note the United States reached a side agreement with Mexico on auto safety standards. However, the USMCA is being touted as having much stricter automotive rules of origin. Steel. The United States and Canada did not reach agreement on U.S. steel and aluminum Section 232 tariffs. U.S. and Canadian officials said that the steel and aluminum tariffs and NAFTA renegotiation were separate issues. Biologics. The USMCA will give biologic drugs 10 years of data exclusivity, which is what the United States and Mexico agreed to in August 2018. Canada's domestic data exclusivity for biologics has been eight years. We also note that the United States reached a side agreement with Canada on guidelines for research and development expenditures. Intellectual property. USMCA...

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