US president had long been a critic of the previous NAFTA agreement, which he said shortchanged US workers.
A day after the historic impeachment vote, the Democrat-led House of Representatives overwhelmingly approved President Donald Trump’s North American trade deal, which replaces the 25-year-old North American Free Trade Agreement (NAFTA).
After a 385-41 vote, the House passed legislation approving the implementation of the US-Mexico-Canada Agreement (USMCA), replacing NAFTA.
During his presidential run in 2016, Trump repeatedly vowed to change NAFTA, which he blames for the loss of tens of thousands of US factory jobs to low-wage alternatives in Mexico.
The approval by the Democrats came following changes to the bill that added tighter environmental rules and a mechanism to investigate labour rights abuses at Mexican factories.
What is NAFTA?
NAFTA that took effect in 1994, essentially slashing tariffs and tearing down trade barriers between the United States, Canada, and Mexico, unleashing a boom in trade in North America.
Supporters of the deal said it created a powerful and competitive regional bloc against Europe and emerging Asian nations.
The deal meant that each NAFTA country could take advantage of its strengths: low-cost manufacturing in Mexico, high skilled labour in Canada and the US, as well as proximity to US and Canadian customer bases.
Initially, there was widespread support for the deal among Americans, including farmers, who benefited from access to large markets in neighbouring states but the agreement also encouraged US manufacturers to move factories south of the US border where they took advantage of the low-wage Mexican border.
Trump who is largely supported by working-class Americans, heavily criticised the deal and called it America’s “worst trade deal”.
Negotiations for a replacement began in August 2017 and the three countries signed the USMCA signed a year ago, after approval from House of Representative, the US Senate must ratify the deal.
What is in USMC?
The pact by-and-large continues to allow the free flow of trade across the borders of the three countries.
It also gives enormous freedom for internet operations, digital services. and e-commerce development, industries that did not exist when NAFTA negotiated.
For instance, USMCA allows US companies to transfer data across borders without encountering discriminatory barriers.
It also eliminates some food safety barriers to US farm products and contains language prohibiting currency manipulation for the first time in a trade agreement.
But more importantly, carmakers, in order to qualify for the deal’s duty-free barries, must get 75 percent of their automotive content from within North America- up from 62.5 percent under NAFTA.
It means more content would have to be domestically sourced in higher-wage North America, instead of cheap imports from China.
Additionally, under USMCA, Mexico is not required to formally allow workers to form independent unions.
Mexican unions traditionally have been co-opted by employers who used to fire labourers who tried to bargain for better pay and working conditions.
The International Trade Commission last April projected that the new deal would boost the economy by $68 billion and add 176,000 jobs six years after taking effect.
Who says what about the deal?
“Twenty-six years ago, I opposed NAFTA with every bone in my body,” said Representative John Lewis.
“I never thought the day would come when we would have the opportunity to right some of the wrongs in that agreement.”
“We’re going forward. Good news,” Mexican Foreign Minister Marcelo Ebrard said on Twitter after the House vote, For nearly three years, the Mexican peso has risen and fallen on any news about NAFTA negotiations.
Canadian Prime Minister Justin Trudeau also told CBC television that Canada’s Parliament would approve the USMCA “as quickly as we can.”
Speaking after the deal was signed, its biggest advocate, Donalt Trump said: “America’s great USMCA Trade Bill is looking good. It will be the best and most important trade deal ever made by the USA. Good for everybody”.
“Importantly, we will finally end our Country’s worst Trade Deal, NAFTA!”