US, Mexico, Canada agree to revise NAFTA to USMCA

02 Oct '18
3 min read

The United States, Canada and Mexico recently agreed to update the North American Free Trade Agreement (NAFTA) that governs trade among the three nations. Most of the key provisions in the new United States-Mexico-Canada Agreement (USMCA) will not start until 2020 because it needs to be signed by leaders from the three countries and approved by the respective legislatures.

The three nations will review the agreement after six years. Under a unanimous agreement, the deal may continue for the full 16-year period, US media reported.

Chapter 19 of the agreement, which allows for a special dispute process and was a bone of contention between the United States and Canada, stays intact. The chapter allows the three nations to challenge each other’s anti-dumping and countervailing duties in front of a panel of representatives from each country.

The US Administration also signed ‘side letters’ allowing Mexico and Canada to dodge President Donald Trump’s auto tariffs. Trump has repeatedly threatened to slap hefty tariffs on car and vehicle parts coming from overseas into the United States.

The USMCA has made several significant changes to environmental and labour regulations, especially related to Mexico, and contains more-stringent protections for patents and trademarks, including for biotechnology, financial services and even domain names.

A Committee on Textile and Apparel Trade Matters has been established composed of government representatives of each country. The United States shall not apply customs duties on textile and apparel goods assembled in Mexico from fabrics wholly formed and cut in the former, excluding visible lining fabrics, and exported from and re-imported into the United States.

On the request of one of the three nations, all parties shall consult to consider whether particular goods should be subject to different rules of origin to address issues of availability of supply of fibres, yarns or fabrics in the free trade area.

The goal of the new deal is also to have more cars and truck parts made in North America. Starting in 2020, to qualify for zero tariffs, a car or truck must have 75 per cent of its components manufactured in one of the three nations, a boost from the current 62.5 per cent requirement.

National Retail Federation (NRF) president and CEO Matthew Shay said the federation will carefully review the agreement to ensure it promotes US economic growth and maintains access to the products American families need at the prices they can afford.

“Unlike the original NAFTA, the new agreement includes a separate textile and apparel chapter. This outcome is a tangible recognition by all three parties of the importance of textile manufacturing to the regional economy,” noted National Council of Textile Organisations (NCTO) president and CEO Auggie Tantillo. (DS)

Fibre2Fashion News Desk – India

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