Updated July 24, 2019
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
Dairy. In a move that the U.S. dairy farmers have
On November 30, 2018, President Trump and the leaders of
applauded, USMCA would increase U.S. dairy access up to
Canada and Mexico signed the United States-Mexico-
3.59% of Canada’s dairy market, but it would not dismantle
Canada Agreement (USMCA). Concluded on September
Canada’s supply-management system. Canada also
30, 2018, USMCA would revise and modernize the North
removed its “Class 7” pricing for ultra-high filtration (UHF)
American Free Trade Agreement (NAFTA). Pursuant to
milk. In return, the United States expanded import quota
trade promotion authority (TPA), the Administration
levels for Canadian dairy and sugar products.
notified Congress of its intention to enter into an agreement
with Mexico, and with Canada if it was willing to join. On
Table 1. Proposed USMCA Select Changes to
September 30, 2018, the United States Trade
NAFTA
Representative (USTR) announced that the three countries
had reached an agreement on a USMCA trade deal that
Sector
USMCA
NAFTA
would revise, modernize, and replace NAFTA upon
Autos
75% ROO; wage
62.5% ROO;
ratification. On May 30, 2019, the Administration
requirement; 2.6
no wage
submitted a draft Statement of Administrative Action
mil ion car quota for
requirement;
(SAA) to implement the proposed USMCA and a copy of
zero tariffs. (side
no quota
the legal text, in accordance with TPA procedures. This
letter)
product provides preliminary comparative analysis between
the two agreements. For information on NAFTA’s current
IPR protection
Biologics: 10 years
No commitments
provisions, see CRS Report R44981, NAFTA Renegotiation
Copyright: 70 years
50 years
and the Proposed United States-Mexico-Canada Agreement
Government
U.S.-MEX only; CAN
Trilateral
(USMCA), by M. Angeles Villarreal and Ian F. Fergusson.
Procurement
to use WTO GPA
commitments
Key Provisions
Digital Trade
Cross-border data
No commitments
USMCA, composed of 34 chapters and 12 side letters,
flows; restricts data
retains most of NAFTA’s chapters, making notable changes
localization
to market access provisions for autos and agriculture
products, and to rules such as investment, government
Investor-State
Not applicable to
Trilateral
procurement, and intellectual property rights (IPR). New
Dispute
U.S.-CAN disputes;
commitments
issues, such as digital trade, state-owned enterprises, and
Settlement
U.S.-MEX disputes
currency misalignment are also addressed.
(ISDS)
restricted
State-owned
SOEs to adhere to
No commitments
Market Access
enterprises
market forces
Motor Vehicles. While NAFTA phased out tariffs on
automotive imports among the three countries, subject to
Source: CRS from USMCA Agreement.
rules-of-origin (ROO) requirements of 62.5% content for
autos, light trucks, engines, and transmissions, and 60% for
Dispute Settlement
all other vehicles and automotive parts, USMCA would
USMCA would maintain the NAFTA state-to-state
tighten ROO by including:
mechanism for most disputes arising under the agreement.
New motor vehicle ROO and procedures,
It would also retain the binational dispute settlement
including product-specific rules, and
mechanism to review trade remedy disputes. However,
requiring 75% North American content;
USMCA would: eliminate investor-state dispute settlement
(ISDS) for Canada after the termination of NAFTA;
Wage requirements stipulating 40%-45%
maintain ISDS only between the United States and Mexico
of auto content be made by workers
for claimants regarding government contracts in the oil,
earning at least $16 per hour;
natural gas, power generation, infrastructure, and
Requirement that 70% of a vehicle’s steel
telecommunications sectors; and maintain U.S.-Mexico
and aluminum must originate in North
ISDS in other sectors provided the claimant exhausts
America;
national remedies first.
Provision aiming to streamline ROO
certification enforcement;
Intellectual Property Rights (IPR)
In addition, side letters would exempt up to 2.6 million
NAFTA was the first free trade agreement (FTA) to include
vehicles from Canada and Mexico annually from potential
an IPR chapter. USMCA would retain NAFTA’s core
Section 232 auto tariffs.
protections for copyrights, patents, including exclusivity
periods for test data, trade secrets, trademarks, and
https://crsreports.congress.gov
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
geographical indications, as well as specific enforcement
Government Procurement (GP)
requirements.
NAFTA set standards and parameters for government
The proposed USMCA provisions include:
purchases of goods and services and opportunities for firms
10 years of data protection for biologics;
of each nation to bid on certain contracts for specified
government agencies above a set monetary threshold on a
Copyright term extended to 70 years;
reciprocal basis. The USMCA provisions would only apply
Prohibitions on circumvention of technological
to U.S.-Mexico procurement, while Canada remains
protection measures;
covered by the more recent and comprehensive World
Criminal and civil penalties protections for trade secret
Trade Organization Government Procurement Agreement
theft, including by state-owned enterprises and cyber-
(GPA). However, the monetary threshold for the GPA is
theft; and
higher at $180,000 as compared to NAFTA’s $25,000.
Copyright safe-harbor provisions on ISP liability.
E-Commerce, Data Flows, and Data Localization
Energy
NAFTA does not contain digital provisions. The proposed
Although USMCA would remove NAFTA’s energy
USMCA includes new digital trade provisions, including
chapter, it would add a new chapter with provisions
prohibiting customs duties on electronically transmitted
recognizing Mexico’s constitution and the Mexican
products and limits on source code disclosure requirements.
government’s direct ownership of hydrocarbons. Existing
USMCA contains broad provisions on cross-border data
foreign investors in the energy sector would likely remain
flows and restrictions on data localization requirements.
protected by similar provisions as those in NAFTA. Mexico
appears to be legally bound by its 2013 constitutional
New Provisions
energy reforms in the energy sector.
Additional provisions in USMCA not in NAFTA include:
Binding obligations on currency misalignment and
TPA: Key TPA Dates and Deadlines for USMCA
misalignment. The parties agreed to “achieve and
maintain a market-determined exchange rate regime,”
August 30, 2018: Notification to Congress of intent to sign
and to “refrain from competitive devaluation, including
agreement with Mexico.
through intervention in the foreign exchange market.”
September 30, 2018: United States and Canada conclude
A sunset clause requiring a joint review and agreement
negotiations; USMCA draft text released. Advisory
on renewal at year 6; in lieu of mutual agreement at the
committee reports released.
time, USMCA would expire 16 years later.
November 30, 2018: Agreement is signed.
A new chapter on State-Owned Enterprises (SOE), to
January 29, 2019: List of required changes to U.S. law
require SOE’s to act in accordance with commercial
delivered to Congress.
considerations and require the State to provide non-
At least 30 days prior to introduction of implementing
discriminatory treatment to competitors.
legislation: Final agreement text, draft Statement of
De Minimis customs threshold for duty free treatment
Administrative Action due.
set a $117 (C$150) for Canada and Mexico. Tax-free
April 18, 2019: International Trade Commission (ITC)
threshold set at $50 for Mexico and C$40 (about $31)
report released (extended due to government shutdown).
for Canada.
May 30, 2019: Draft Statement of Administration Action
Allowing a party to withdraw from the agreement if
(SAA) and text of the agreement submitted to Congress.
another party enters into an FTA with a country it deems
to be a non-market economy (e.g., China).
Labor and the Environment
Issues for Congress
NAFTA side agreements on worker rights and the
Some issues for Congress include:
environment were the first associated with an FTA.
The TPA timetable for consideration.
USMCA would revise and incorporate provisions and
Whether USMCA meets TPA’s negotiating objectives
provide the same dispute mechanism as other parts of the
or other requirements and modernizes NAFTA.
agreement. USMCA would require parties to:
Whether or how provisions on labor, environment,
Adopt and maintain in statutes and regulation the
pharmaceuticals, and enforcement could be changed or
International Labor Organization (ILO) Declaration of
enhanced to meet congressional concerns.
Rights at Work.
Enforce and not to waive or derogate from these laws in
How USMCA would affect future U.S. FTAs given its
a manner involving trade or investment.
reduced commitments such as ISDS, GP, sunset clause,
and de minimis levels.
Prohibit the most harmful fisheries subsidies and include
environmental provisions including illegal trafficking,
marine species, air quality, and sustainable forestry.
Ian F. Fergusson, Specialist in International Trade and
Finance
USMCA would commit Mexico to legislative actions in
M. Angeles Villarreal, Specialist in International Trade
regard to the effective right to collective bargaining. On
and Finance
May 1, 2019, Mexico enacted a labor reform bill aimed at
enhancing Mexican worker rights.
IF10997
https://crsreports.congress.gov
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10997 · VERSION 7 · UPDATED