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USMCA trade deal

  • IASbaba
  • December 12, 2019
  • 0
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USMCA trade deal

Part of: GS Prelims and GS Mains II- International Relations

In News

  • The US, Mexico and Canada have finalised the United States-Mexico-Canada Agreement (USMCA) that will replace the 25-year-old North American Free Trade Agreement (NAFTA).
  • But the deal needs approval by legislatures in the three countries before it can move forward.

Salient Features ofU.S.-Mexico-Canada Agreement (USMCA)

  • USMCA is intended to last 16 years and will be reviewed every 6 years.
  • Agriculture:  Farmers of major crops no longer have to worry about President Trump potentially pulling out of the existing Nafta and leaving them fewer major export markets. USMCA also gives dairy farmers more access to Canada.Tariffs of up to 275% have kept most foreign milk out of the Canadian market.
  • Auto Rules: Compared with Nafta, USMCA significantly tightens the rules that the auto industry has to follow in order to trade vehicles duty free in North America. A certain proportion of a car will have to be produced by workers with higher wages, and a greater proportion of components will have to originate in North America.
  • Pharma: The new dealremoves requirements for a 10-year exclusivity period for biologic drugs [medication derived from or containing components of biological organisms, rather than having been totally synthesized], which would have benefited large pharmaceutical companies.
  • It also includes stronger protections for workers, tough environmental rules, updates the trade relationship to cover the digital economy and provides tougher intellectual property protections.
  • Digital Freedom: USMCA, unlike the current Nafta, includes rules mandating the free flow of data among the three countries. 
  • Canada managed to preserve the dispute-settlement mechanism as a protection for its wood industry.
  • It also adds provisions to prevent “manipulation” of the trade rules, including covering currency values, and controls over outside countries trying to take advantage of the duty-free market.

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