The United States–Mexico–Canada Agreement: Overview and Outlook

Gary Clyde Hufbauer (PIIE) and Steven Globerman (Fraser Institute)
November 6, 2018

Summary

  • The US-Mexico-Canada Agreement replaces NAFTA as the legal North American trade and investment regime. It will be implemented after ratification by each government. Ratification in the US by a likely newly elected Democratic Congress is probable, but not certain.
  • Notwithstanding President Trump's characterization of NAFTA as the worst trade deal ever signed by the US, the USMCA doesn't create much change.
  • The main changes from NAFTA affect the auto sector. Higher domestic content requirements and an implicit minimum wage will likely increase the costs of producing autos in North America. Canadian consumers will be worse off, but Canadian auto companies might benefit if some production activity moves from Mexico to Canada.
  • Dairy exports from the US to Canada will increase modestly. Supply management remains intact in Canada—to the detriment of Canadian consumers.
  • Intellectual property protection, particularly for biological drugs, will be strengthened in Canada. This might mean higher prices for Canadians but also possibly greater access to new drugs.
  • Canadian cultural regulations remain untouched. Whether they can be maintained in practice with the growth of Internet broadcasting is an open question.
  • The dispute resolution mechanism remains in place. However, given the power that US presidents have to restrict trade in the interests of national security, the value to Canada of continuing the dispute resolution process is also questionable.
  • Existing US steel and aluminum tariffs remain in place.