Updated January 10, 2020
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
Streamlining of ROO certification enforcement.
On November 30, 2018, President Trump and the leaders of
Canada and Mexico signed the United States-Mexico-
Dairy. USMCA would increase U.S. dairy access up to
Canada Agreement (USMCA). USMCA would revise and
3.59% of Canada’s dairy market, but it would not dismantle
modernize the North American Free Trade Agreement
Canada’s supply-management system. Canada also
(NAFTA), in place since 1994. Pursuant to trade promotion
removed its “Class 7” pricing for ultra-high filtration (UHF)
authority (TPA), the Administration notified Congress of its
milk. In return, the United States expanded import quota
intention to enter into USMCA.
levels for Canadian dairy and sugar products.
On December 10, 2019, the United States, Canada, and
Table 1.Proposed USMCA Select Changes to NAFTA
Mexico agreed to a protocol of amendment to the proposed
USMCA. The revisions include modifications to key
Sector
USMCA
NAFTA
elements of the original text regarding dispute settlement,
labor and environmental provisions, intellectual property
Autos
75% ROO; 70% steel
62.5% ROO;
rights (IPR) protection, and steel and aluminum
and aluminum
no wage
requirements in the motor vehicle industry rules of origin.
requirement; steel
requirement;
Amendments also provide for a facility-specific rapid
must be melted and
no steel and
response labor mechanism to address worker rights
poured in region;
aluminum
provisions. On December 13, 2019, the Trump
wage requirement.
requirement.
Administration submitted to Congress the proposed
USMCA implementing legislation. On the same day, the
IPR protection
Biologics: No
Biologics: No
United States-Mexico Canada Implementation Act (H.R.
commitments (10
commitments
5430) was introduced in the House of Representatives. On
years in original text)
Copyright: 50
December 16, the companion bill was introduced in the
Copyright: 70 years
years
Senate (S. 3052). The House Ways and Means Committee
Government
U.S.-MEX only; CAN
Trilateral
approved the legislation on December 17, 2019, and the full
Procurement
to use WTO GPA
commitments
House approved the bill on December 19, 2019, by a vote
of 385-41. The Senate Finance Committee approved the
Digital Trade
Cross-border data
No commitments
legislation on January 7, 2020.
flows; restricts data
Key Provisions
localization
USMCA, composed of 34 chapters and 12 side letters,
Investor-State
Not applicable to
Trilateral
retains most of NAFTA’s chapters, making notable changes
Dispute
U.S.-CAN disputes;
commitments
to market access provisions for autos and agriculture
Settlement
U.S.-MEX disputes
products, to rules such as investment, government
(ISDS)
restricted
procurement, and intellectual property rights (IPR), and to
labor and the environment. New issues, such as digital
State-owned
SOEs to adhere to
No commitments
trade, state-owned enterprises, and currency misalignment
enterprises
market forces
are also addressed.
Source: CRS from USMCA Agreement.
Market Access
Motor Vehicles. While NAFTA phased out tariffs on
Dispute Settlement
automotive imports among the three countries, subject to
USMCA would maintain the NAFTA state-to-state
rules-of-origin (ROO) requirements of 62.5% content for
mechanism for most disputes arising under the agreement.
autos, light trucks, engines, and transmissions, and 60% for
It would also retain the binational dispute settlement
all other vehicles and automotive parts, USMCA would
mechanism to review trade remedy disputes. However,
tighten ROO by including the following.
USMCA would: eliminate investor-state dispute settlement
New motor vehicle ROO and procedures, including
(ISDS) for Canada after the termination of NAFTA;
product-specific rules and requiring 75% North
maintain ISDS only between the United States and Mexico
American content.
for claimants regarding government contracts in the oil,
Wage requirements stipulating that 40%-45% of auto
natural gas, power generation, infrastructure, and
content be made by workers earning at least $16 per
telecommunications sectors; and maintain U.S.-Mexico
hour.
ISDS in other sectors provided the claimant exhausts
A requirement that 70% of a vehicle’s steel and
national remedies first. The revised USMCA removed
aluminum must originate in North America (changes to
language allowing a party to block the formation of a
USMCA require that steel be melted and poured in
dispute settlement panel.
North America).
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 hydrocarbo
prohibiting customs duties on electronically transmitted
ns. 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
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https://crsreports.congress.gov | IF10997 · VERSION 11 · UPDATED