Updated January 30, 2020
Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
USMCA require that steel be melted and poured in
On November 30, 2018, President Trump and the leaders of
North America).
Canada and Mexico signed the United States-Mexico-
Streamlining of ROO certification enforcement.
Canada Agreement (USMCA). USMCA would revise and
modernize the North American Free Trade Agreement
Dairy. USMCA increases U.S. dairy access up to 3.59% of
(NAFTA), in place since 1994. Pursuant to trade promotion
Canada’s dairy market, but it would not dismantle Canada’s
authority (TPA), the Administration notified Congress of its
supply-management system. Canada also removed its
intention to enter into USMCA.
“Class 7” pricing for ultra-high filtration (UHF) milk. In
On December 10, 2019, the United States, Canada, and
return, the United States expanded import quota levels for
Mexico agreed to a protocol of amendment to the proposed
Canadian dairy and sugar products.
USMCA. The revisions include modifications to key
Table 1.Proposed USMCA Select Changes to NAFTA
elements of the original text regarding dispute settlement,
labor and environmental provisions, intellectual property
Sector
USMCA
NAFTA
rights (IPR) protection, and steel and aluminum
requirements in the motor vehicle industry rules of origin.
Autos
75% ROO; 70% steel
62.5% ROO;
Amendments also provide for a facility-specific rapid
and aluminum
no wage
response labor mechanism to address worker rights
requirement; steel
requirement;
provisions. The Trump Administration submitted the
must be melted and
no steel and
proposed implementing legislation to Congress on
poured in region;
aluminum
December 13, 2019. On the same day, the USMCA
wage requirement.
requirement.
Implementation Act (H.R. 5430) was introduced in the
House of Representatives. On December 16, the companion
IPR protection
Biologics: No
Biologics: No
bill was introduced in the Senate (S. 3052). The legislation
commitments (10
commitments
was passed by the House Ways and Means Committee on
years in original text)
Copyright: 50
December 17; by the full House on December 19 by a vote
Copyright: 70 years
years
of 385-41; by the Senate Finance Committee on January 7,
Government
U.S.-MEX only; CAN
Trilateral
2020; and by the full Senate on January 16 by a vote of 89-
Procurement
to use WTO GPA
commitments
10. President Trump signed the legislation on January 29,
2020 (P.L. 116-113).
Digital Trade
Cross-border data
No commitments
flows; restricts data
Key Provisions
localization
USMCA, composed of 34 chapters and 12 side letters,
retains most of NAFTA’s chapters, making notable changes
Investor-State
Not applicable to
Trilateral
to market access provisions for autos and agriculture
Dispute
U.S.-CAN disputes;
commitments
products, to rules such as investment, government
Settlement
U.S.-MEX disputes
procurement, and intellectual property rights (IPR), and to
(ISDS)
restricted
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
rules-of-origin (ROO) requirements of 62.5% content for
USMCA maintains the NAFTA state-to-state mechanism
autos, light trucks, engines, and transmissions, and 60% for
for most disputes arising under the agreement. It also
all other vehicles and automotive parts, USMCA tightens
retains the binational dispute settlement mechanism to
ROO by including the following.
review trade remedy disputes. However, USMCA:
eliminates investor-state dispute settlement (ISDS) for
New motor vehicle ROO and procedures, including
Canada after the termination of NAFTA; maintains ISDS
product-specific rules and requiring 75% North
only between the United States and Mexico for claimants
American content.
regarding government contracts in the oil, natural gas,
Wage requirements stipulating that 40%-45% of auto
power generation, infrastructure, and telecommunications
content be made by workers earning at least $16 per
sectors; and maintains U.S.-Mexico ISDS in other sectors
hour.
provided the claimant exhausts national remedies first. The
A requirement that 70% of a vehicle’s steel and
revised USMCA removes procedures allowing a party to
aluminum must originate in North America (changes to
block the formation of a dispute settlement panel.
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 retains NAFTA’s core protections
Mexican labor reform monitoring, creation of a new
for copyrights, patents, including exclusivity periods for
interagency committee on labor with reporting
test data, trade secrets, trademarks, and geographical
requirements to Congress, and enhanced anti-worker
indications, as well as specific enforcement requirements.
violence and forced labor provisions.
The revised USMCA removes provisions on biologic data
Government Procurement (GP)
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 only apply to
U.S.-Mexico procurement, while Canada remains covered
criminal and civil penalties protections for trade secret
by the more recent and comprehensive World Trade
theft, including by state-owned enterprises and cyber-
Organization Government Procurement Agreement (GPA).
theft; and
However, the monetary threshold for the GPA is higher at
copyright safe-harbor provisions on ISP liability.
$180,000 as compared to NAFTA’s $25,000.
Energy
E-Commerce, Data Flows, and Data Localization
Although USMCA removes NAFTA’s energy chapter, it
NAFTA does not contain digital provisions. The USMCA
would add a new chapter with provisions recognizing
Mexico’s constitution and the Mexican government’s direct
includes new digital trade provisions, including prohibiting
customs duties on electronically transmitted products and
ownership of hydrocarbons. Existing foreign investors in
limits on source code disclosure requirements. USMCA
the energy sector would likely remain protected by similar
contains broad provisions on cross-border data flows and
provisions as those in NAFTA. Mexico appears to be
restrictions on data localization requirements.
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 revises NAFTA and incorporate provisions to
pharmaceuticals, and enforcement meet congressional
provide the same dispute mechanism as other parts of the
concerns.
agreement. USMCA requires 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 12 · UPDATED