Updated December 20, 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
USMCA. The revisions include modifications to key
Autos
75% ROO; 70% steel
62.5% ROO;
elements of the original text regarding dispute settlement,
and aluminum
no wage
labor and environmental provisions, intellectual property
requirement; steel
requirement;
rights (IPR) protection, and steel and aluminum
must be melted and
no steel and
requirements in the motor vehicle industry rules of origin.
poured in region;
aluminum
Amendments also provide for a facility-specific rapid
wage requirement.
requirement.
response labor mechanism to address worker rights
provisions. On December 13, the Trump Administration
IPR protection
Biologics: No
Biologics: No
submitted to Congress the proposed USMCA implementing
commitments (10
commitments
legislation. On the same day, the United States-Mexico
years in original text)
Copyright: 50
Canada Implementation Act (H.R. 5430) was introduced in
Copyright: 70 years
years
the House of Representatives. On December 16, the
Government
U.S.-MEX only; CAN
Trilateral
companion bill was introduced in the Senate (S. 3052). The
Procurement
to use WTO GPA
commitments
House Ways and Means Committee approved the
legislation on December 17, 2020, and the full House
Digital Trade
Cross-border data
No commitments
approved the bill on December 19, 2020, by a vote of
flows; restricts data
385-41.
localization
Key Provisions
Investor-State
Not applicable to
Trilateral
USMCA, composed of 34 chapters and 12 side letters,
Dispute
U.S.-CAN disputes;
commitments
retains most of NAFTA’s chapters, making notable changes
Settlement
U.S.-MEX disputes
to market access provisions for autos and agriculture
(ISDS)
restricted
products, to rules such as investment, government
procurement, and intellectual property rights (IPR), and to
State-owned
SOEs to adhere to
No commitments
labor and the environment. New issues, such as digital
enterprises
market forces
trade, state-owned enterprises, and currency misalignment
Source: CRS from USMCA Agreement.
are also addressed.
Market Access
Dispute Settlement
Motor Vehicles. While NAFTA phased out tariffs on
USMCA would maintain the NAFTA state-to-state
automotive imports among the three countries, subject to
mechanism for most disputes arising under the agreement.
rules-of-origin (ROO) requirements of 62.5% content for
It would also retain the binational dispute settlement
autos, light trucks, engines, and transmissions, and 60% for
mechanism to review trade remedy disputes. However,
all other vehicles and automotive parts, USMCA would
USMCA would: eliminate investor-state dispute settlement
tighten ROO by including the following.
(ISDS) for Canada after the termination of NAFTA;
New motor vehicle ROO and procedures, including
maintain ISDS only between the United States and Mexico
product-specific rules and requiring 75% North
for claimants regarding government contracts in the oil,
American content.
natural gas, power generation, infrastructure, and
Wage requirements stipulating that 40%-45% of auto
telecommunications sectors; and maintain U.S.-Mexico
content be made by workers earning at least $16 per
ISDS in other sectors provided the claimant exhausts
hour.
national remedies first. The revised USMCA removed
A requirement that 70% of a vehicle’s steel and
language allowing a party to block the formation of a
aluminum must originate in North America (changes to
dispute settlement panel.
USMCA require that steel be melted and poured in
North America).
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
Government Procurement (GP)
biologic data protection, among other changes.
NAFTA set standards and parameters for government
The proposed USMCA provisions include
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
to U.S.-Mexico procurement, while Canada remains
criminal and civil penalties protections for trade secret
covered by the more recent and comprehensive World
theft, including by state-owned enterprises and cyber-
Trade Organization Government Procurement Agreement
theft; and
(GPA). However, the monetary threshold for the GPA is
copyright safe-harbor provisions on ISP liability.
higher at $180,000 as compared to NAFTA’s $25,000.
Energy
E-Commerce, Data Flows, and Data Localization
Although USMCA would remove NAFTA’s energy
NAFTA does not contain digital provisions. The proposed
chapter, it would add a new chapter with provisions
recognizing Mexico’s constitution and the Mexican
USMCA includes new digital trade provisions, including
government’s direct ownership of hydrocarbons
prohibiting customs duties on electronically transmitted
. Existing
products and limits on source code disclosure requirements.
foreign investors in the energy sector would likely remain
USMCA contains broad provisions on cross-border data
protected by similar provisions as those in NAFTA. Mexico
flows and restrictions on data localization requirements.
appears to be legally bound by its 2013 constitutional
energy reforms in the energy sector.
New USMCA Provisions
Binding obligations on currency misalignment and
TPA: Key TPA Dates and Deadlines for USMCA
misalignment.
August 30, 2018: Notification to Congress of intent to sign
A sunset clause requiring a joint review and agreement
agreement with Mexico.
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
set a $117 for Canada and Mexico. Tax-free threshold
January 29, 2019: List of required changes to U.S. law
delivered to Congress.
set at $50 for Mexico and C$40 for Canada.
Allowing a party to withdraw from the agreement if
April 18, 2019: International Trade Commission (ITC)
report released (extended due to government shutdown).
another party enters into an FTA with a country it deems
to be a nonmarket economy (e.g., China).
May 30, 2019: Draft Statement of Administration Action
(SAA) and text of the agreement submitted to Congress.
Issues for Congress
December 13 and 16, 2019: Implementing legislation
Some issues for Congress include
introduced in House and Senate.
Whether TPA procedures and notification requirements
90 legislative day deadline for Congress to vote.
have been followed.
Whether USMCA meets TPA’s negotiating objectives.
Labor and Environment
Whether modified provisions on labor, environment,
USMCA would revise NAFTA and incorporate provisions
pharmaceuticals, and enforcement meet congressional
to provide the same dispute mechanism as other parts of the
concerns.
agreement. USMCA would require parties to
How USMCA would affect future U.S. FTAs given its
Adopt, maintain, enforce, and not derogate from statutes
reduced commitments such as ISDS, GP, and de
and regulation regarding the International Labor
minimis levels and expanded revisions on worker rights.
Organization (ILO) Declaration of Rights at Work.
Adopt, maintain, enforce, and not derogate from
See also, CRS In Focus IF11391, USMCA: Amendment and
environmental laws, including seven multilateral
Key Changes, by M. Angeles Villarreal and Ian F.
environment agreements;
Fergusson
Revisions to USMCA include shifting the burden of
proof to the responding party that a complaint affects
M. Angeles Villarreal, Specialist in International Trade
trade and investment unless otherwise demonstrated.
and Finance
Ian F. Fergusson, Specialist in International Trade and
Finance
https://crsreports.congress.gov
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
IF10997
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 10 · UPDATED