Five things you need to know about USMCA – ING

ING analysts recently published a report highlighting the key points of the new NAFTA trade pact.

“Less threats on Canada’s autos:  Well, unless production surpasses 2.6 million units annually, which is unlikely given they currently stand at (roughly) 1.8 million units. The dynamics of the auto industry concerning the three participating countries of USMCA will also change; to qualify for tariff-free entrance into the US, 75% of automobile content is now required to be produced in the NAFTA-region, up from 62.5%, and 40% of the input into making automobiles must come from factories paying workers at least US$16 per hour.”

“Tariffs aren’t gone completely:  Quite surprisingly, Canada agreed to finalise the deal with the steel and aluminium tariffs still in place. This was an important factor Canada said they needed to see gone before they could reach an agreement with the US, but it seems negotiators changed their minds.”

“Chapter 19 isn’t going to budge: The dispute settlement system, particularly Nafta’s Chapter 19 which was concerned with anti-dumping and countervailing duties, was one of the major sticking points in the negotiations. Canada battled hard to keep this, often stating it was a red line they wouldn’t cross.”

“Canada’s dairy industry was likely used as a negotiating tactic:  Canada has agreed to allow US expansion into their protected dairy market, likely a concession offered to the US with hope to fudge their way to the final deal.”

“Good day, sunshine:  USMCA will have a 16-year term, with a review every 6 years. Canada will see this as an improvement to the ‘sunset clause’; a Nafta expiration date of every 5 years, initially proposed by the US.”