The North American Free Trade Agreement (NAFTA) has been a significant trade agreement between Mexico, the United States, and Canada since 1994. However, in 2018, the three countries decided to renegotiate the terms of NAFTA, leading to the creation of the Canada-Mexico-United States Agreement (CUSMA).
The agreement aimed to modernize NAFTA and address issues such as digital trade, labor rights, and environmental protections. CUSMA builds on the successes of NAFTA while addressing some of its limitations. For instance, the new agreement enhances intellectual property protections and includes provisions on trade in services and investment.
CUSMA also includes revised rules of origin for automobiles, requiring that 75% of automobile components be produced in the United States, Canada, or Mexico to qualify for duty-free trade under the agreement. The agreement also stipulates that 40-45% of automobile components must be made by workers earning at least $16 per hour.
One of the significant changes in CUSMA is the inclusion of a sunset clause that requires the agreement to be reviewed every six years, with the option to extend it for an additional 16 years. The sunset clause is designed to provide more certainty and stability for businesses and investors while ensuring that the agreement remains relevant and up-to-date.
Another key feature of CUSMA is its labor chapter, which aims to strengthen labor protections and improve working conditions in all three countries. The labor chapter includes provisions that require Mexico to enact laws to facilitate the formation of independent unions and collective bargaining, which can help address labor violations and improve wages and working conditions.
Overall, the Canada-Mexico-United States Agreement is a significant achievement for all three countries. It modernizes NAFTA while addressing some of its shortcomings, including provisions that enhance intellectual property protections, improve labor rights, and promote environmental sustainability. The agreement also provides more certainty and stability for businesses and investors, which can help drive economic growth and job creation in all three countries.