How do we move from NAFTA to USMCA?

Wednesday, January 29, 2020

In 1994, Mexico, the United States and Canada signed an agreement to establish a free trade zone between the three countries. 

Carlos Salinas de Gortari, George H.W. Bush and Brian Mulroney put together teams to negotiate the rules that would regulate regional trade.

The result is considered one of the biggest economic liberalization accomplishments in the world.

Almost three decades after the signing of NAFTA, the annual volume of commercial exchange between Mexico, the United States and Canada exceeds the…. dollar benchmark.

However, all free-trade agreements have winners and losers.

The working class in the United States suffered at the expense of multinational corporations and millions of consumers across the NAFTA region.

That’s why, in 2016 when Donald Trump took office, he promised to restore the former economic privileges of American workers.

Regarding NAFTA, his position was clear:

In his first month as president, he threatened to pull out of the agreement. The exchange rate from pesos to dollars increased to 21.

Then, Mexico and Canada were called to the negotiating table and a long discussion followed to substitute NAFTA with  USMCA.

  • Three key agreements were reached:
  • Labour rights in Mexico were expanded
  • A new dispute resolution mechanism was established
  • The rules of content and origin of the automobile and steel industries were increased substantially. 

By late 2019, final details were agreed upon and signed in Mexico City.

On January 16th, the US Senate approved USMCA, with 89 votes in favor and 10 votes against. The Republican Party strongly backed up president Trump’s key initiative. 

But the Democratic Party is still divided. 

However, all dissident votes came from democratic senators, including one of the strongest possible presidential candidates for 2020: Bernie Sanders. 

Despite that, USMCA is backed up by key political figures on the left such as Nancy Pelosi, speaker of the House of Representatives, as well as Elizabeth Warren, one of the progressive candidates contending in the upcoming democratic primaries. 

USMCA has gone through the most important legislative filter: the US Congress. Its implementation is virtually a fact.

And with it, North America ratifies its status as the most competitive free trade region in the world.