Canada’s new NAFTA with the United States and Mexico

The new trade agreement has taken effect and includes some updates for modern-day trade

On July 1, 2020, the new trade agreement between Canada, the United States and Mexico came into effect. This agreement, called the Canada-United States-Mexico Agreement (CUSMA), is an updated replacement for the North American Free Trade Agreement (NAFTA) which has been governing trade in North America since 1994. 

The new agreement goes by many names. In Canada its official name is CUSMA, in the United States it is the United States-Mexico-Canada Agreement (USMCA) and in Mexico it is the Tratado entre México, Estados Unidos y Canadá (T-MEC). It has also been referred to simply as the new NAFTA, since it maintains NAFTA’s tariff-free market access. 

The goal of the new agreement is to address modern-day trade through updates and the addition of new chapters. Here are some of the highlights of the new agreement:

Trade 

In addition to maintaining tariff-free trade benefits between Canada, the United States and Mexico, CUSMA includes a new chapter on customs administration and trade facilitation. This is designed to set up a modern standard for customs procedures to help make the free-flow of goods easier. 

Agriculture

In the new agreement, Canada gained new market access for refined sugar, sugar-containing products and certain dairy products through tariff rate quotas. Canada was also able to maintain its current supply management system, despite opposition to the system from the United States. In return, Canada will give the United States new market access for dairy, poultry and egg products through tariff rate quotas. 

Automotive

NAFTA required 62.5 per cent of a car’s value to come from North American labour and materials. CUSMA has increased this to 75 per cent. Additionally, 40 per cent of the value of a passenger car needs to come from materials, parts and labour from facilities that pay workers at least 16 U.S. dollars an hour. 

Labour

CUSMA ensures that the member countries don’t lower their labour and working condition standards in order to attract trade or investment. It also includes commitments to protect principles and rights at work such as the right to unionize and bargain collectively, prohibiting importing goods made from forced labour and obligations for migrant worker rights. 

Environment

Although the new agreement doesn’t have any provisions about limiting climate change, it does include new commitments addressing other environmental challenges like illegal wildlife trade, illegal fishing, ozone-depleting substances and conservation of biological diversity. Additionally, according to the Government of Canada’s summary of the agreement, “for the first time in an environment chapter, CUSMA includes innovative environmental commitments to improve air quality and combat marine litter.” 

Intellectual property

Under the new agreement, Canada will change some of its legal and policy framework for intellectual property. This includes expanding copyright protections from the current term of the author’s life plus 50 years to the author’s life plus 70 years. As part of updating the agreement to modern-day needs, there are also provisions to address online infringement. 

In December 2019, some of CUSMA’s provisions on patents and pharmaceutical intellectual property were amended. With the goal of keeping down drug prices, the three countries agreed to remove the requirement to give 10 years of data protection for biotech medicines. 

Review process 

To make sure that the new agreement continues to be relevant and beneficial for North American business and trade, it will be formally reviewed at least every six years. The review process is designed to address new issues as they appear. The agreement will be valid for 16 years, but can be extended after each review.  

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