To help you avoid the most important issues surrounding the new United States-Mexico-Canada Trade Agreement, we've rounded up some of the most important things to consider when considering this agreement and any other trade agreement.
1. What are trade agreements?
Though many people see trade agreements as alliances that result in interstate commerce, trade agreements take many forms. Each country enters into an agreement that defines what it expects from the other party. Trade agreements can also be as complex as rerouting traffic on a railroad crossing or establishing a natural-disaster fund.
2. What is the USMCA?
The United States, Mexico, and Canada have agreed to update and deepen trade ties, including revisions to many different pillars of the North American Free Trade Agreement, or NAFTA.
3. What are some of the most significant changes in the USMCA?
The most important additions include increased participation for women in the economy, better market access for agricultural products, rules that allow the provincial government to target specific industries for subsidies and regulations, and increased protection for minority businesses and dairy workers.
4. Will the USMCA result in new trade barriers?
This is a common argument made by free traders and deficit hawks. The USMCA has no anti-deficit provisions, giving Canada and Mexico room to provide greater protection to their own small businesses, increases competitiveness, and generate more exports of their manufactured goods. The USMCA retains the full flexibility of NAFTA, allowing all three countries to maintain existing barriers, such as the approximately $500 billion tariff gap the US currently imposes on Canadian imports. This is a far cry from the claims made by many trade-hawk lobbyists, which are unfounded and only aim to scare Americans into fearing trade alliances.
5. What are the negatives of the USMCA?
The positive features of the new agreement have been met with caution from numerous trade-avoidance institutions, including the U.S. Chamber of Commerce, who feel the agreement fails to improve global free trade in the long run. However, some of the negative elements are points of contention within the original NAFTA: the USA has agreed to end its energy independence, which in turn would enable Mexico to lower the barriers to all goods and services, even ones that are more expensive than the USA. The USA also agreed to tighten its borders by sealing its own border before imposing whatever tariffs it deems appropriate. However, Mexico, thanks to its small size, was able to achieve a looser than most WTO standards to impose tariffs without incurring loss of market access to the USA. The ability to arbitrate disputes, including missing $16 billion in arrears and undervaluing cattle, in less than five days without retaliation from the other side was also a major step forward for the USA.
6. Is the USMCA bad for American consumers?
This question is fraught with confusion, with proponents and opponents responding as they see fit. Some advocates of the agreement feel that it opens up the US to dramatically lower tariffs, spurring an influx of new commerce. However, IFAI, the most powerful trade-pact lab, points out that even with relatively lower trade barriers, international trade continues to pay very little attention to volume. This, combined with the fact that most people perceive domestic business as "the" best way to buy products, has inflated perceptions of even modest trade deals, making it nearly impossible to measure long-term benefits. For example, the Tokyo Motor Show, celebrating the world's top cars, is not a place where many people would pay a lot of attention to China or India. A chief disappointment, however, has been the toll trade agreements take on small-businessmen and women. A poorly worded trade deal can devastate local economies, encourage hiring by corporations, and push industries away from the local region.
7. How can I learn more about the USMCA?
Watch the video here.