Updated December 17, 2019
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
Dairy. USMCA would increase U.S. dairy access up to
On November 30, 2018, President Trump and the leaders of
3.59% of Canada’s dairy market, but it would not dismantle
Canada and Mexico signed the United States-Mexico-
Canada’s supply-management system. Canada also
Canada Agreement (USMCA). USMCA would revise and
removed its “Class 7” pricing for ultra-high filtration (UHF)
modernize the North American Free Trade Agreement
milk. In return, the United States expanded import quota
(NAFTA), in place since 1994. Pursuant to trade promotion
levels for Canadian dairy and sugar products.
authority (TPA), the Administration notified Congress of its
intention to enter into USMCA.
Table 1. Proposed USMCA Select Changes to NAFTA
On December 10, 2019, the United States, Canada, and
Sector
USMCA
NAFTA
Mexico agreed to a protocol of amendment to the proposed
Autos
75% ROO; 70% steel
62.5% ROO;
USMCA. The revisions include modifications to key
and aluminum
no wage
elements of the original text regarding dispute settlement,
requirement; steel
requirement;
labor and environmental provisions, intellectual property
must be melted and
no steel and
rights (IPR) protection, and steel and aluminum
poured in region;
aluminum
requirements in the motor vehicle industry rules of origin.
wage requirement.
requirement.
Amendments also provide for a facility-specific rapid
response labor mechanism to address worker rights
IPR protection
Biologics: No
Biologics: No
provisions. On December 13, the Trump Administration
commitments (10
commitments
submitted to Congress the proposed USMCA implementing
years in original text)
Copyright: 50
legislation. On the same day, the United States-Mexico
Copyright: 70 years
years
Canada Implementation Act (H.R. 5430) was introduced in
the House of Representatives. On December 16, the bill
Government
U.S.-MEX only; CAN
Trilateral
was introduced in the Senate (S. 3052).
Procurement
to use WTO GPA
commitments
Key Provisions
Digital Trade
Cross-border data
No commitments
flows; restricts data
USMCA, composed 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, to rules such as investment, government
Dispute
U.S.-CAN disputes;
commitments
procurement, and intellectual property rights (IPR), and to
Settlement
U.S.-MEX disputes
labor and the environment. New issues, such as digital
(ISDS)
restricted
trade, state-owned enterprises, and currency misalignment
are also addressed.
State-owned
SOEs to adhere to
No commitments
enterprises
market forces
Market Access
Source: CRS from USMCA Agreement.
Motor Vehicles. While NAFTA phased out tariffs on
automotive imports among the three countries, subject to
Dispute Settlement
rules-of-origin (ROO) requirements of 62.5% content for
USMCA would maintain the NAFTA state-to-state
autos, light trucks, engines, and transmissions, and 60% for
mechanism for most disputes arising under the agreement.
all other vehicles and automotive parts, USMCA would
It would also retain the binational dispute settlement
tighten ROO by including:
mechanism to review trade remedy disputes. However,
 New motor vehicle ROO and procedures, including
USMCA would: eliminate investor-state dispute settlement
product-specific rules, and requiring 75% North
(ISDS) for Canada after the termination of NAFTA;
American content;
maintain ISDS only between the United States and Mexico
 Wage requirements stipulating 40%-45% of auto
for claimants regarding government contracts in the oil,
content be made by workers earning at least $16 per
natural gas, power generation, infrastructure, and
hour;
telecommunications sectors; and maintain U.S.-Mexico
 Requirement that 70% of a vehicle’s steel and aluminum ISDS in other sectors provided the claimant exhausts
must originate in North America (changes to USMCA
national remedies first. The revised USMCA removed
require that steel be melted and poured in North
language allowing a party to block the formation of a
America);
dispute settlement panel.
 Streamlining of ROO certification enforcement;
https://crsreports.congress.gov

Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
Intellectual Property Rights (IPR)
 USMCA changes include a rapid response mechanism
NAFTA was the first free trade agreement (FTA) to include
for worker rights complaints at covered facilities,
an IPR chapter. USMCA would retain NAFTA’s core
Mexican labor reform monitoring, creation of a new
protections for copyrights, patents, including exclusivity
interagency committee on labor with reporting
periods for test data, trade secrets, trademarks, and
requirements to Congress, and enhanced anti-worker
geographical indications, as well as specific enforcement
violence and forced labor provisions.
requirements. The revised USMCA removed provisions on
biologic data protection, among other changes.
Government Procurement (GP)
The proposed USMCA provisions include:
NAFTA set standards and parameters for government

purchases of goods and services and opportunities for firms
Copyright term extended to 70 years;

of each nation to bid on certain contracts for specified
Prohibitions on circumvention of technological
government agencies above a set monetary threshold on a
protection measures;
reciprocal basis. The USMCA provisions would only apply
 Criminal and civil penalties protections for trade secret
to U.S.-Mexico procurement, while Canada remains
theft, including by state-owned enterprises and cyber-
covered by the more recent and comprehensive World
theft; and
Trade Organization Government Procurement Agreement
 Copyright safe-harbor provisions on ISP liability.
(GPA). However, the monetary threshold for the GPA is
higher at $180,000 as compared to NAFTA’s $25,000.
Energy
Although USMCA would remove NAFTA’s energy
E-Commerce, Data Flows, and Data Localization
chapter, it would add a new chapter with provisions
NAFTA does not contain digital provisions. The proposed
recognizing Mexico’s constitution and the Mexican
USMCA includes new digital trade provisions, including
government’s direct ownership of hydrocarbons. Existing
prohibiting customs duties on electronically transmitted
foreign investors in the energy sector would likely remain
products and limits on source code disclosure requirements.
protected by similar provisions as those in NAFTA. Mexico
USMCA contains broad provisions on cross-border data
appears to be legally bound by its 2013 constitutional
flows and restrictions on data localization requirements.
energy reforms in the energy sector.
New USMCA Provisions
TPA: Key TPA Dates and Deadlines for USMCA
 Binding obligations on currency misalignment and
misalignment.

August 30, 2018: Notification to Congress of intent to sign

agreement with Mexico.
A sunset clause requiring a joint review and agreement
on renewal at year 6; in lieu of mutual agreement at the

September 30, 2018: USMCA draft text released. Advisory
time, USMCA would expire 16 years later.
committee reports released.
 A new chapter on State-Owned Enterprises (SOE).

November 30, 2018: Agreement is signed.
De Minimis customs threshold for duty free treatment

January 29, 2019: List of required changes to U.S. law
set a $117 for Canada and Mexico. Tax-free threshold
delivered to Congress.
set at $50 for Mexico and C$40 for Canada.

April 18, 2019: International Trade Commission (ITC)
 Allowing a party to withdraw from the agreement if
report released (extended due to government shutdown).
another party enters into an FTA with a country it deems

May 30, 2019: Draft Statement of Administration Action
to be a nonmarket economy (e.g., China).
(SAA) and text of the agreement submitted to Congress.

December 13 and 16, 2019: Implementing legislation
Issues for Congress
introduced in House and Senate.
Some issues for Congress include:

90 legislative day deadline for Congress to vote.
 The TPA timetable for consideration.

 Whether USMCA meets TPA’s negotiating objectives.
Labor and Environment
 Whether modified provisions on labor, environment,
pharmaceuticals, and enforcement meet congressional
USMCA would revise NAFTA and incorporate provisions
concerns.
to provide the same dispute mechanism as other parts of the
 How USMCA would affect future U.S. FTAs given its
agreement. USMCA would require parties to:
reduced commitments such as ISDS, GP, and de
 Adopt, maintain, enforce, and not derogate from statutes
minimis levels and expanded revisions on worker rights.
and regulation regarding the International Labor
Organization (ILO) Declaration of Rights at Work.
See also CRS Report R44981, NAFTA Renegotiation and
 Adopt, maintain, enforce, and not derogate from
the Proposed United States-Mexico-Canada Agreement
environmental laws, including seven multilateral
(USMCA), by M. Angeles Villarreal and Ian F. Fergusson
environment agreements;
 Revisions to USMCA include shifting the burden of
M. Angeles Villarreal, Specialist in International Trade
proof to the responding party that a complaint affects
and Finance
trade and investment unless otherwise demonstrated.
Ian F. Fergusson, Specialist in International Trade and
Finance
https://crsreports.congress.gov

Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement

IF10997


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https://crsreports.congress.gov | IF10997 · VERSION 8 · UPDATED