Updated February 22, 2019
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
Table 1. Proposed USMCA Select Changes to
On November 30, 2018, President Trump and the leaders of
NAFTA
Canada and Mexico signed the United States-Mexico-
Canada Agreement (USMCA). Concluded on September
Sector
USMCA
NAFTA
30, 2018, USMCA would revise and modernize the North
Autos
75% ROO; wage
62.5% ROO;
American Free Trade Agreement (NAFTA). Pursuant to
requirement; 2.6
no wage
trade promotion authority (TPA), the Administration
mil ion car quota for
requirement;
notified Congress of its intention to sign the agreement with
zero tariffs. (side
no quota
Mexico on August 31, 2018. Canada joined the agreement
letter)
on September 30, 2018, and it was signed by the three
parties on November 30. This product provides preliminary
IPR protection
Biologics: 10 years
No commitments
comparative analysis between the two agreements. For
Copyright: 70 years
50 years
information on NAFTA’s current provisions, see CRS
Government
U.S.-MEX only; CAN
Trilateral
Report R44981, NAFTA Renegotiation and Modernization,
Procurement
to use WTO GPA
commitments
by M. Angeles Villarreal and Ian F. Fergusson.
Key Provisions
Digital Trade
Cross-border data
No commitments
flows; restricts data
USMCA, comprised of 34 chapters and 12 side letters,
localization
retains most of NAFTA’s chapters, making notable changes
to market access provisions for autos and agriculture
Investor-State
Not applicable to
Trilateral
products, and to rules such as investment, government
Dispute
U.S.-CAN disputes;
commitments
procurement, and intellectual property rights (IPR). New
Settlement
U.S.-MEX disputes
issues, such as digital trade, state-owned enterprises, and
(ISDS)
restricted
currency misalignment are also addressed.
State-owned
SOEs to adhere to
No commitments
enterprises
market forces
Market Access
Motor Vehicles.
While NAFTA phased out tariffs on
Source: CRS from USMCA Agreement.
automotive imports among the three countries, subject to
rules-of-origin (ROO) requirements of 62.5% content for
Dispute Settlement
autos, light trucks, engines, and transmissions, and 60% for
USMCA would maintain the NAFTA state-to-state
all other vehicles and automotive parts, USMCA would
mechanism for most disputes arising under the agreement.
tighten ROO by including:
It would also retain the binational dispute settlement
 New motor vehicle ROO and procedures,
mechanism to review trade remedy disputes. However,
including product-specific rules, and
USMCA would: eliminate investor-state dispute settlement
requiring 75% North American content;
(ISDS) for Canada after the termination of NAFTA;

maintain ISDS only between the United States and Mexico
Wage requirements stipulating 40%-45%
for claimants regarding government contracts in the oil,
of auto content be made by workers
natural gas, power generation, infrastructure, and
earning at least $16 per hour;

telecommunications sectors; and maintain U.S.-Mexico
Requirement that 70% of a vehicle’s steel
ISDS in other sectors provided the claimant exhausts
and aluminum must originate in North
national remedies first.
America;
 Provision aiming to streamline ROO
Intellectual Property Rights (IPR)
certification enforcement;
NAFTA was the first free trade agreement (FTA) to include
In addition, side letters would exempt up to 2.6 million
an IPR chapter. USMCA would retain NAFTA’s core
vehicles from Canada and Mexico annually from potential
protections for copyrights, patents, including exclusivity
Section 232 auto tariffs.
periods for test data, trade secrets, trademarks, and
geographical indications, as well as specific enforcement
Dairy. In a move that the U.S. dairy farmers have
requirements.
applauded, USMCA would increase U.S. dairy access up to
3.59% of Canada’s dairy market, but it
The proposed USMCA provisions include:
would not dismantle
Canada’s supply

-management system. Canada also
10 years of data protection for biologics;
removed its “Class 7” pricing for ultra-high filtration (UHF)
 Copyright term extended to 70 years;
milk. In return, the United States expanded import quota
 Prohibitions on circumvention of
levels for Canadian dairy and sugar products.
technological protection measures;
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Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
 Criminal and civil penalties protections
comprehensive World Trade Organization Government
for trade secret theft, including by state-
Procurement Agreement (GPA). However, the monetary
owned enterprises and cyber-theft; and
threshold for the GPA is higher at $180,000 as compared to

NAFTA’s $25,000, thus reducing Canada’s opportunities to
Copyright safe-harbor provisions on ISP
bid on U.S. contracts.
liability.
Energy
E-Commerce, Data Flows, and Data Localization
Although USMCA would remove NAFTA’s energy
NAFTA was implemented in the early days of the Internet,
chapter, it would add a new chapter with provisions
and does not contain digital provisions. The proposed
recognizing Mexico’s constitution and the Mexican
USMCA includes new digital trade provisions similar to
government’s direct ownership of hydrocarbons. Other
those of the proposed Trans-Pacific Partnership (TPP),
provisions would, in effect, “lock in” the current legal
including prohibiting customs duties on electronically-
framework for private energy projects in Mexico.
transmitted products, and limits on source code disclosure
requirements. USMCA contains broader provisions on
cross-border data flows and restrictions on data localization
TPA: Key TPA Dates and Deadlines for USMCA
requirements than TPP.

August 30, 2018: Notification to Congress of intent to sign
agreement with Mexico.
New Provisions

Additional provisions in USMCA not in NAFTA include:

September 30, 2018: United States and Canada conclude
negotiations; USMCA draft text released. Advisory
 Binding obligations on currency misalignment and
committee reports released.
misalignment. The parties agreed to “achieve and

maintain a market-determined exchange rate regime,”

November 30, 2018: Agreement is signed.
and to “refrain from competitive devaluation, including

January 29, 2019: List of required changes to U.S. law
through intervention in the foreign exchange market.”
delivered to Congress.
 A sunset clause requiring a joint review and agreement

At least 30 days prior to introduction of implementing
on renewal at year 6; in lieu of mutual agreement at the
legislation: Final agreement text, draft Statement of
Administrative Action due.
time, USMCA would expire 16 years later.


A new chapter on State-Owned Enterprises (SOE), to

Around April 20, 2019: International Trade Commission
require SOE’s to act in accordance with commercial
(ITC) report due (extended due to government shutdown)
considerations and require the State to provide non-
Source: CRS In Focus IF10038, Trade Promotion Authority (TPA), by Ian
discriminatory treatment to competitors.
F. Fergusson.
De Minimis customs threshold for duty free treatment
Note: Canada and Mexico have their own ratification processes.
set a $117 (C$150) for Canada and Mexico. Tax-free
Labor and the Environment
threshold set at $50 for Mexico and C$40 (about $31)
for Canada.
NAFTA side agreements on worker rights and the
 Allows a party to withdraw from the agreement if
environment were the first associated with an FTA.
another party enters into an FTA with a country it deems
USMCA would revise and incorporate provisions into the
to be a non-market economy (e.g., China).
main text and provide the same dispute mechanism as other
parts of the agreement. USMCA would require parties to:
Issues for Congress
 Adopt and maintain in statutes and regulation the
Some issues for Congress include:
International Labor Organization (ILO) Declaration of
 The timetable for consideration.
Rights at Work.
 Whether USMCA meets TPA’s negotiating objectives
 Enforce their own labor and environmental laws, and
or other requirements and modernizes NAFTA.
not to waive or derogate from these laws in a manner
 Whether provisions on labor and environment would
involving trade or investment.
strengthen enforcement mechanisms.
 Prohibit the most harmful fisheries subsidies and include  Whether it would achieves the President’s stated goal of
provisions related to illegal trafficking, marine species,
increasing domestic manufacturing, and whether its
air quality, marine litter, and sustainable forestry.
more restrictive ROO is beneficial to the vehicle sector.
USMCA would commit Mexico to legislative actions in
 Whether it represents a template for future FTAs, given
regard to the effective right to collective bargaining.
its reduced commitments issues such as ISDS, GP,
sunset clause, and de minimis levels.
Government Procurement (GP)
NAFTA contains a GP chapter, which set standards and
parameters for government purchases of goods and services
Ian F. Fergusson, Specialist in International Trade and
and opportunities for firms of each nation to bid on certain
Finance
contracts for specified government agencies above a set
M. Angeles Villarreal, Specialist in International Trade
monetary threshold on a reciprocal basis. The USMCA GP
and Finance
chapter only applies to U.S.-Mexico procurement, while
IF10997
Canada remains covered by the more recent and
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Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement


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https://crsreports.congress.gov | IF10997 · VERSION 5 · UPDATED