The United States-Mexico-Canada Agreement (USMCA)

October 12, 2017 – May 29, 2024 R44981

The United States-Mexico-Canada Agreement
May 29, 2024
(USMCA)
M. Angeles Villarreal
The United States-Mexico-Canada Agreement (USMCA) entered into force on July 1,
Specialist in International
2020, replacing the North American Free Trade Agreement (NAFTA), which had been in Trade and Finance
effect since January 1, 1994. Congress, in both its legislative and oversight capacities,

was active in numerous trade policy issues related to renegotiation of NAFTA and
continues to be active in the implementation of USMCA. The renegotiation of NAFTA

began 90 days after the May 2017 notice that the Trump Administration sent to Congress of its intent to begin
talks with Canada and Mexico to renegotiate and modernize NAFTA, as was required by the 2015 Trade
Promotion Authority (TPA). Negotiations officially began on August 16, 2017, and were concluded on September
30, 2018. The USMCA was signed on November 30, 2018. The agreement was approved by the House of
Representatives (H.R. 5430) on December 19, 2019, by a vote of 385-41, and by the Senate on January 16, 2020,
by a vote of 89-10. The agreement was signed into law on January 29, 2020 (P.L. 116-113) and entered into force
five months later.
NAFTA was particularly significant because it was the most comprehensive free trade agreement (FTA)
negotiated at the time, contained several groundbreaking provisions, and was the first of a new generation of U.S.
FTAs later negotiated. NAFTA established trade liberalization commitments and set new rules and disciplines for
future FTAs on issues important to the United States, including intellectual property rights protection, services
trade, dispute settlement procedures, investment, labor, and the environment. NAFTA’s market-opening provisions
gradually eliminated nearly all tariff and most nontariff barriers on merchandise trade among the three trading
partners. At the time of NAFTA negotiations, average applied U.S. duties on imports from Mexico were 2.07%,
while U.S. businesses faced average tariffs of 10%, in addition to nontariff and investment barriers, in Mexico.
The U.S.-Canada FTA, which had been in effect since 1989, was suspended under NAFTA.
USMCA, comprised of 34 chapters and 12 side letters, retains most of NAFTA’s market opening measures and
other measures, while making notable changes to motor vehicle rules of origin, dispute settlement provisions,
government procurement, investment, and intellectual property rights (IPR) protection. It also modernizes
provisions on services, labor, and the environment. New trade issues, such as digital trade, state-owned
enterprises, anticorruption, and currency misalignment, also have specific commitments. Key issues for Congress
in the debate surrounding USMCA included worker rights protection in Mexico, IPR provisions and rules of
origin changes, the enforceability of labor and environmental provisions, as well the constitutional authority of
Congress over international trade and its role in revising, approving, or withdrawing from the agreement.
Congress was also active in considering U.S. negotiating objectives and the extent to which USMCA made
progress in meeting them, as required under TPA.
Key issues for Congress in the implementation phase of USMCA include how the new importing requirements
under USMCA are being phased in; how the North American motor vehicle industry is being affected by the more
stringent rules of origin requirements; how well Mexico is implementing labor law reforms to provide more
worker rights protection; how well the funding provided by USMCA legislation is ensuring effective
implementation of Mexico’s labor reforms; how well the new labor enforcement measures, including the rapid
response mechanism, are working; and, among other issues, the extent to which USMCA’s updated dispute
resolution procedures are improving the enforcement of the agreement’s provisions.
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The United States-Mexico-Canada Agreement (USMCA)

Introduction
The United States-Mexico-Canada Agreement (USMCA) is a free trade agreement among the
United States, Mexico, and Canada that entered into force on July 1, 2020, replacing the 1994
North American Free Trade Agreement (NAFTA).1 Congress, in both its legislative and oversight
capacities, was active in issues related to renegotiation of NAFTA and continues to be active in
the implementation of USMCA and other trade policy issues related to USMCA. Implementing
legislation for USMCA was passed by the House on December 19, 2019, by a vote of 385-41, and
by the Senate on January 16, 2020, by a vote of 89-10. The legislation was signed into law on
January 29, 2020 (P.L. 116-113).
Key issues for Congress in the debate surrounding the renegotiation of NAFTA and passage of
USMCA included labor and environmental provisions, digital trade, intellectual property rights
(IPR) protection, changes to rules of origin in the motor vehicle industry, the economic effects of
the agreement, as well as the constitutional authority of Congress over international trade and its
role in revising, approving, or withdrawing from an agreement.
This report provides a brief overview of NAFTA, the role of Congress in the renegotiation
process, key provisions in USMCA, as well as issues related to implementation of the agreement.
Overview of NAFTA
Key NAFTA provisions included tariff and nontariff trade liberalization, rules of origin,
commitments on services trade and foreign investment, IPR protection, government procurement
rules, and dispute resolution. Labor and environmental provisions were in separate NAFTA side
agreements. NAFTA provisions and rules governing trade were groundbreaking in a number of
areas, particularly in regard to enforceable rules and disciplines that were included in a trade
agreement for the first time. There were almost no FTAs in place worldwide at the time, and
NAFTA influenced subsequent agreements negotiated by the United States and other countries,
especially at the multilateral level, in light of the then-pending Uruguay Round of major
multilateral trade liberalization negotiations.
Key NAFTA provisions included the following:
• Market Opening. NAFTA eliminated nearly all tariffs and most nontariff
barriers on goods produced within North America. It removed Mexico’s
restrictive tariffs, quotas, and import licenses on products from the United States
and Canada.2 NAFTA helped “lock in” Mexico’s trade and investment
liberalization and ensured basic protections for U.S. and Canadian investors in
Mexico.3
• Agriculture. NAFTA eliminated tariffs and tariff-rate quotas (TRQs) on most
agricultural products. It maintained TRQs with high over-quota tariffs for U.S.
exports of dairy, poultry, and egg products to Canada. NAFTA addressed sanitary
and phytosanitary (SPS) measures and other types of agricultural non-tariff
barriers. SPS regulations are often regarded by agricultural exporters as one of

1 See CRS In Focus IF10047, North American Free Trade Agreement (NAFTA), by M. Angeles Villarreal, and CRS In
Focus IF10997, U.S.-Mexico-Canada (USMCA) Trade Agreement, by M. Angeles Villarreal.
2 Mexico’s average tariff on all imports from the United States in 1993 was 10%, compared to the U.S. tariff of 2.07%.
3 Prior to NAFTA U.S. businesses were very restricted in investing in Mexico under Mexico’s former Law to Promote
Mexican Investment and Regulate Foreign Investment.
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the greatest challenges in trade, often resulting in increased costs and product
loss and disrupting integrated supply chains.4
• Investment. NAFTA removed significant investment barriers in Mexico, ensured
basic protections for NAFTA investors, and provided a mechanism for the
settlement of disputes between investors and a NAFTA country. NAFTA
provided for national and “nondiscriminatory treatment” for foreign investment
by NAFTA parties in certain sectors of other NAFTA countries. The agreement
included country-specific liberalization commitments and exceptions to national
treatment. Exemptions from NAFTA included the energy sector in Mexico, in
which the Mexican government reserved the right to prohibit private investment
or foreign participation.
• Services Trade. NAFTA services provisions established a set of basic rules and
obligations in services trade among partner countries. The agreement granted
services providers certain rights concerning nondiscriminatory treatment, cross-
border sales and entry, investment, and access to information. However, there
were certain exclusions and reservations by each country. These included
maritime shipping (United States), film and publishing (Canada), and oil and gas
drilling (Mexico).5 NAFTA liberalized certain service sectors in Mexico,
particularly financial services, which significantly opened its banking sector.6
• Financial Services. Under NAFTA, Canada extended an exemption granted
to the United States, under the Canada-United States Free Trade Agreement
(CUSFTA), to Mexico in which Mexican banks would not be subject to
Canadian investment restrictions. In turn, Mexico agreed to permit financial
firms from another NAFTA country to establish financial institutions in
Mexico, subject to certain market-share limits applied during a transition
period ending by the year 2000.
• Telecommunications Services. NAFTA partners agreed to exclude provision
of, but not the use of, basic telecommunications services in the agreement.
NAFTA granted a “bill of rights” for the providers and users of
telecommunications services, including access to public telecommunications
services; connection to private lines that reflect economic costs and are
available on a flat-rate pricing basis; and the right to choose, purchase, or
lease terminal equipment best suited to their needs.7 NAFTA did not require
parties to authorize a person of another NAFTA country to provide or operate
telecommunications transport networks or services. Nor did it bar a party
from maintaining a monopoly provider of public networks or services.8
• Intellectual Property Rights (IPR) Protection. NAFTA was the first U.S. FTA
to include a chapter on IPR protection provisions. It built upon the then-ongoing
Uruguay Round negotiations that would create the Trade Related Aspects of
Intellectual Property Rights (TRIPS) agreement in the WTO and on various

4 See CRS Report R44875, The North American Free Trade Agreement (NAFTA) and U.S. Agriculture, by Renée
Johnson.
5 United States General Accounting Office (GAO, now called Government Accountability Office), “North American
Free Trade Agreement: Assessment of Major Issues, Volume 2,” Report to the Congress, September 1993, pp. 35-36.
6 Hufbauer and Schott, NAFTA Revisited, p. 28.
7 GAO, Report to Congress, September 1993, pp. 38-39.
8 Office of the United States Trade Representative (USTR), Description of the Proposed North American Free Trade
Agreement, August 12, 1992, p. 29.
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existing international intellectual property treaties. The agreement set specific
enforceable commitments by NAFTA parties regarding the protection of
copyrights, patents, trademarks, and trade secrets, among other provisions.
• Dispute Resolution. NAFTA’s provisions for preventing and settling disputes
regarding enforcement of commitments under the agreement were built upon
provisions in the CUSFTA. NAFTA created a system of arbitration for resolving
disputes that included initial consultations, taking the issue to the NAFTA Trade
Commission, or going through arbitral panel proceedings.9 NAFTA included
separate dispute settlement provisions for addressing disputes related to
investment and over antidumping and countervailing duty determinations.
• Government Procurement. NAFTA opened up a significant portion of federal
government procurement in each country on a nondiscriminatory basis to
suppliers from other NAFTA countries for goods and services. It contained some
limitations for procurement by state-owned enterprises.
• Labor and Environment. NAFTA marked the first time that labor and
environmental provisions were associated with an FTA. Some stakeholders
viewed it as an opportunity to establish a new type of relationship among NAFTA
partners.10 Labor and environmental provisions, which were in separate side
agreements, included language to promote cooperation on labor and
environmental matters as well as provisions to address a party’s failure to enforce
its own labor and environmental laws. Perhaps most notable, at the time, were the
side agreements’ dispute settlement processes that, as a last resort, could impose
monetary assessments and sanctions to address a party’s failure to enforce its
laws.

NAFTA Background
In 1992, the United States, Canada and Mexico signed the North American Free Trade Agreement (NAFTA),
which had been negotiated by President George H. W. Bush and his counterparts in Canada and Mexico. In
December 1993, President Wil iam J. Clinton signed the NAFTA Implementation Act into law (P.L. 103-182).
The agreement entered into force on January 1, 1994. NAFTA was widely debated because it was the first U.S.
FTA involving a lower-income country and because it established trade liberalization commitments that led the
way in setting new rules for future trade agreements on issues important to the United States. These included
provisions on intellectual property rights (IPR) protection, services trade, agriculture, dispute settlement
procedures, investment, labor, and the environment. NAFTA also was influential in concluding major multilateral
trade negotiations under the General Agreement on Tariffs and Trade (GATT) and its successor, the World
Trade Organization (WTO).
NAFTA’s market-opening provisions gradually eliminated nearly all tariff and most nontariff barriers on goods and
services produced and traded within North America. Prior to NAFTA, average applied U.S. duties on imports
from Mexico averaged about 2.07% and over 50% of U.S. imports from Mexico entered duty free. In contrast, U.S.
goods and services faced significantly higher tariff, nontariff, and investment barriers in Mexico. After the
agreement entered into force, trade among NAFTA partners more than tripled, forming integrated production
chains among all three countries. NAFTA expanded trade and economic linkages among the parties, creating more
efficient production processes, increasing the availability of lower-priced and greater choice of consumer goods,
and improving living standards and working conditions. Critics of NAFTA and subsequent U.S. FTAs contend that

9 If the parties are unable to resolve the issue through consultations, they may take the dispute to the NAFTA Trade
Commission, which is composed of Ministers or cabinet-level officers designated by each country. A party may also
request the establishment of an arbitral panel, which may make recommendations for the resolution of the dispute.
10 Woodrow Wilson International Center for Scholars, NAFTA at 10: Progress, Potential, and Precedents, pp. 20-30.
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it resulted in adverse employment trends, downward pressure on U.S. wages, and that it did not do enough to
improve labor standards and environmental conditions abroad.
NAFTA accelerated ongoing trade and investment trends at the time of its negotiation. The U.S.-Canada Free
Trade Agreement (CUSFTA) was already in effect and Mexico was undergoing significant liberalization efforts and
shifting away from protectionist trade policies that had been in effect since the 1930s. Mexico’s former restrictive
Law to Promote Mexican Investment and Regulate Foreign Investment restricted foreign participation in Mexico’s
economy; about two-thirds of Mexican economic activity was not open to majority foreign ownership prior to
NAFTA. U.S. businesses were prohibited from majority ownership in any investments under these restrictions,
which failed to increase income levels or economic growth. NAFTA helped lock in Mexico’s efforts at the time to
liberalize its economy.
Note: For more information, see CRS Report R42965, The North American Free Trade Agreement (NAFTA), by M.
Angeles Vil arreal.

Economic Trends
The income disparity between Mexico and its USMCA partners remains large, even after
NAFTA’s entry into force in 1994. In 1994, for example, Mexico’s per capita GDP ($5,856) was
equal to 21% of U.S. per capita GDP ($27,788). In 20-23, nearly 30 years later, this percentage
went down 17% ($13,927 in Mexico compared to $80,474 in the United States) (see Figure 1).
Figure 1. Per Capita GDP Compared Among USMCA Countries

Source: Created by CRS with data from the Economist Intelligence Unit Ltd. (EIU).
Notes: PPP refers to purchasing power parity, which reflects the purchasing power of foreign currencies in U.S.
dol ars.

Trade Trends
NAFTA had the most significant effect on Mexico, as demonstrated by the reliance of the
Mexican economy on trade. Mexico’s exports of goods and services as a percentage of GDP, for
example, increased significantly, from 13% in 1994 to 36% in 2023 (see Figure 2). The U.S.
economy relies far less on trade with exports of goods and services equaling only 11% of GDP in
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2023. While Canada relies more on trade, the changes between 1994 and 2022 have been
minimal.

Figure 2. Imports and Exports of Goods and Services (% GDP) Compared

Source: Created by CRS with data from Economist Intelligence Unit Ltd.

U.S. trade in goods with NAFTA partners increased after the agreement entered into force, with
imports increasing more rapidly than exports. U.S. total exports of goods to NAFTA/USMCA
partners increased from $165.1 billion in 1994 to $677.2 billion in 2023, while imports of goods
increased from $178.4 billion to $896.7 billion during the same time period (see Figure 3).
In services, U.S. exports to NAFTA/USMCA partners increased from $38.1 billion in 1999 to
$120.8 billion in 2023, while U.S. services imports increased from $27.7 billion in 1999 to $94.2
billion in 2023. The United States has had a services trade surplus with Canada and Mexico since
at least 1999.11 In 2023, the services trade surplus was $26.5 billion. By comparison, the U.S.
goods trade deficit in 2023 reached a low of $219.5 billion (see Figure 4).

11 Trade services data in this report is from the U.S. Bureau of Economic Analysis at https://www.bea.gov, which
provides data for the years 1999-2022.
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Figure 3. U.S. Merchandise Trade with USMCA Partners: 1993-2023

Source: Compiled by CRS using trade data from the U.S. International Trade Commission’s Interactive Tariff
and Trade Data Web, at http://dataweb.usitc.gov.
Figure 4. U.S. Trade Balance with USMCA Partners: 1999-2023

Source: Compiled by CRS using data from the U.S. Bureau of Economic Analysis and USITC.
U.S. Investment with Canada and Mexico
Foreign direct investment (FDI) has been an integral part of the U.S. economic relationship with
Canada and Mexico for many years. Two-way investment between Canada and the United States
has increased markedly, both in terms of the stock and flow of investment. The United States is
the largest single investor in Canada with stock of FDI reaching $438.8 billion in 2022, up from a
stock of $96.6 billion in 1997 (see Figure 5). Investment from the United States represents about
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half of the total stock of FDI in Canada from global investors. The United States was the largest
destination for Canada’s total FDI in 2022, with a stock of $683.8 billion, a significant increase
from $78.6 billion in 1997 (by ultimate beneficial owner).
In Mexico, the United States is also the largest source of FDI. The stock of U.S. FDI in Mexico
increased from $24.1 billion in 1997 to $130.3 billion in 2022 (see Figure 5). Mexican FDI in the
United States, while substantially lower than U.S. investment in Mexico, has also increased
rapidly under NAFTA/USMCA, from $4.1 billion in 1997 to $54.0 billion in 2022 (by ultimate
beneficial owner).12
Figure 5. Foreign Direct Investment Positions Among NAFTA Partners: 1993-2022
(historical-cost basis, by ultimate beneficial owner)

Source: CRS based on latest available data from U.S. Department of Commerce, Bureau of Economic Analysis.
USMCA Negotiation Process and TPA
Under Article II of the Constitution, the President has the authority, with the advice and consent
of the Senate, to make treaties. Under Article I, Section 8, Congress has the authority to lay and
collect duties, and to regulate foreign commerce. The President sought expedited treatment of the
implementing legislation for USMCA under the Bipartisan Comprehensive Trade Promotion and
Accountability Act of 2015 (TPA 2015), which was authorized through July 1, 2021 (P.L. 114-
26).
Under TPA 2015, the President was required to consult with Congress before giving the required
90-day notice of his intention to start negotiations.13 The Trump Administration’s consultations
included meetings between then-U.S. Trade Representative Robert Lighthizer and Members of
the House Ways and Means Committee and Senate Finance Committee and with Members of the
House and Senate Advisory Groups on Negotiations.14 The Office of the United States Trade

12 Foreign direct investment data in this section is derived from data from the Bureau of Economic Analysis online
database at http://www.bea.gov, accessed on September 25, 2023.
13 CRS In Focus IF10038, Trade Promotion Authority (TPA), by Christopher A. Casey and Cathleen D. Cimino-Isaacs.
14 These groups were created by TPA to provide additional opportunities for consultation with the committees of
jurisdiction, as well as other committees with jurisdiction over potential subject matter in the trade agreement.
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Representative (USTR) held public hearings prior to the release of the negotiating objectives and
received more than 12,000 public comments.15
In order to use TPA expedited procedures, the President was required to notify and consult with
Congress before initiating and during negotiations, and adhere to several reporting requirements
following the conclusion of any negotiations resulting in an agreement. The President also was
required to conduct the negotiations based on the negotiating objectives set forth by Congress in
the 2015 TPA authority. See the box below for the dates on which these requirements were met.
Key Dates for USMCA and TPA
•
May 17, 2017: Ninety-day Presidential notification to Congress of intent to begin negotiations with Canada and
Mexico.
•
July 17, 2017: USTR publication of a summary of specific objectives with respect to the negotiations.
•
August 16, 2017: Negotiations with Mexico and Canada began.
•
August 30, 2018: Notification to Congress of intent to sign agreement.
•
September 30, 2018: USMCA draft text released. Advisory committee reports released.
•
November 30, 2018: USMCA signed.
•
January 29, 2019: List of required changes to U.S. law delivered to Congress.
•
April 18, 2019: International Trade Commission (ITC) report released.
•
May 30, 2019: Draft Statement of Administrative Action (SAA) and text of the agreement submitted to Congress.
•
December 13 and 16, 2019: Implementing legislation introduced in House of Representatives (H.R. 5430) and
companion bil introduced in the Senate (S. 3052).
•
December 19, 2019, and January 7, 2020: Legislation approved by the House of Representatives by a vote of 385-
41 and by the Senate by a vote of 89-10.
•
January 29, 2020: USMCA signed into law (P.L. 116-113).
•
July 1, 2020: USMCA enters into force.
USMCA Provisions
USMCA, comprising 34 chapters and 12 side letters, retains most of NAFTA’s market-opening
commitments, while making notable changes to market access provisions for autos and
agriculture products, and to rules and disciplines, such as on investment, government
procurement, and IPR. It includes new provisions, including digital trade, state-owned
enterprises, anticorruption, and currency misalignment. The following selective topics provide an
overview of USMCA provisions.16
Rules of Origin
Rules of origin in FTAs help ensure that the benefits of the FTA are granted only to goods
produced by the parties that are signatories to the FTAs rather than to goods made wholly or in
large part in other countries. Under USMCA, most goods that contain materials from non-
USMCA countries may only be considered as North American if the materials are sufficiently
transformed in the USMCA region to go through a Harmonized Tariff Schedule (HTS) change in

15 Office of the United States Trade Representative, Summary of Objectives for the NAFTA Renegotiation, July 17,
2017, p. 2, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/july/ustr-releases-nafta-negotiating.
16 The Protocol of Amendment to the United States-Mexico-Canada Agreement is available at https://ustr.gov/trade-
agreements/free-trade-agreements/united-states-mexico-canada-agreement/protocol-amendments.
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tariff classification (called a “tariff shift”). In many cases, goods must have a minimum level of
North American content in addition to undergoing a tariff shift.
USMCA requires that the regional value content of most goods is not less than 60% if the
“transaction-value” method is used, or not less than 50% if the “net-cost” method is used.
Regional value content may be calculated using either method. The transaction-value method,
which is simpler, is based on the price of the good, while the net-cost method is based on the total
cost of the good less the costs of royalties, sales promotion, and packing and shipping. Producers
generally have the option to choose which method they use, with some exceptions, such as the
motor vehicle industry (see “Motor Vehicle Industry” below), which must use the net-cost
method.17 If a U.S. import does not meet the minimum content level under USMCA rules-of-
origin requirements, it will enter the United States under another import program or at U.S. Most
Favored Nation (MFN) tariff rates. An Annex to the rules of origin chapter in USMCA has
product-specific rules for different industries, including for motor vehicles and parts.
Motor Vehicle Industry
USMCA raised the regional value content requirements for the motor vehicle industry formerly
required under NAFTA. NAFTA required 62.5% North American content for autos, light trucks,
engines and transmissions; and 60% for automotive parts.
USMCA’s more restrictive rules of origin in the motor vehicle industry include
• product-specific rules requiring 75% North American content;
• wage requirements stipulating 40%-45% of North American auto content be
made by workers earning at least $16 per hour (for the first time in any U.S. trade
agreement);
• a requirement that 70% of a vehicle’s steel and aluminum must originate (melted
and poured) in North America; and
• a provision aiming to streamline the enforcement of manufacturers’ rules of
origin certification requirements.
Agriculture
USMCA partners agreed to maintain NAFTA’s market opening provisions and add several other
non-market access provisions in the agriculture and sanitary and phytosanitary standards (SPS)
chapter.18 USMCA agriculture provisions include the following:
• regulatory alignment among the parties;
• protection for proprietary formulas for pre-packaged foods and food additives
(limited to furthering “legitimate objective[s],” which is not defined);
• SPS rules based on “relevant scientific principles;” and
• greater transparency in SPS rules.
Biotechnology provisions in USMCA affecting agriculture include the following:

17 For more information, see CRS In Focus IF10754, Rules of Origin, by Liana Wong and CRS Report RL34524,
International Trade: Rules of Origin, by Liana Wong.
18 For more information on USMCA and agriculture, see CRS Report R44875, The North American Free Trade
Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson.
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• transparent and timely application and approval process for crops using
biotechnology;
• procedures for import shipments containing a low-level presence of an
unapproved crop produced with biotechnology; and
• establishment of a working group on agricultural biotechnology.

NAFTA and Agriculture
NAFTA set out separate bilateral undertakings on cross-border trade in agriculture, one between Canada and
Mexico, and the other between Mexico and the United States. As a general matter, U.S.-Canada FTA provisions
continue to apply on trade with Canada. Under CUSFTA, Canada excluded dairy, poultry, and eggs for tariff
elimination. In return, the United States excluded dairy, sugar, cotton, tobacco, peanuts, and peanut butter. Some
products continue to be subject to high above-quota tariffs, such as U.S. dairy and poultry exports to Canada.
Regarding U.S.-Mexico agriculture trade, NAFTA eliminated most non-tariff barriers in agricultural trade, either
through their conversion to tariff-rate quotas (TRQs) or ordinary tariffs. Tariffs were phased out over a period of
15 years with sensitive products such as sugar and corn receiving the longest phase-out periods. Approximately
one-half of U.S.-Mexico agricultural trade became duty-free when the agreement went into effect. Prior to
NAFTA, However, approximately one-fourth of U.S. agricultural exports to Mexico (by value) were subjected to
restrictive import licensing requirements.
For more information on NAFTA and agriculture, see CRS Report R44875, The North American Free Trade
Agreement (NAFTA) and U.S. Agriculture, by Renée Johnson.
Customs and Trade Facilitation
Customs and trade facilitation relates to the efficient flow of legally traded goods in and out of
the United States and other countries. Enforcement of U.S. trade laws and import security are
other important components of customs operations at the border. The World Trade Organization
(WTO) Trade Facilitation Agreement (TFA), the newest international trade agreement in the
WTO, entered into force on February 22, 2017. Two-thirds of WTO members, including the
United States, Canada, and Mexico, ratified the multilateral agreement.19 Trade facilitation
measures in trade agreements aim to simplify and streamline customs procedures to allow the
easier flow of trade across borders and thereby reduce the costs of trade. Trade facilitation can be
defined narrowly as improving administrative procedures at the border or more broadly to also
encompass behind-the-border measures and regulations. The TFA aims to address trade barriers,
such as lack of customs procedural transparency and overly burdensome documentation
requirements.20
Under USMCA, parties affirm their rights and obligations under the WTO TFA. USMCA
provisions also include commitments to administer customs procedures in such ways as to
facilitate trade or the transit of a good while supporting compliance with domestic laws and
regulations. Parties commit to create a Trade Facilitation Committee to cooperate on trade
facilitation and adopt additional measures if necessary. Other provisions include measures for
online publication of information and resources related to trade facilitation, communications
mechanisms, establishment of enquiry points to respond to enquiries by interested persons, rules
for issuing written advance customs rulings, procedures for efficient release of goods to facilitate
trade between the parties, expedited customs procedures for express shipments, automated risk
analysis and management procedures, creation of a single-access window system to enable

19 CRS Report R44777, WTO Trade Facilitation Agreement, by Rachel F. Fefer and Vivian C. Jones.
20 Ibid.
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electronic submission through a single entry point for importation into the territory of another
party, and transparency procedures. Given the magnitude and frequency of U.S. trade with
USMCA partners, the more updated customs provisions in USMCA could have a significant
impact on companies engaged in trilateral trade.21
Energy
USMCA does not have an energy chapter and moved some of NAFTA’s energy provisions to
other parts of the agreement. The USMCA adds a new chapter specifically recognizing Mexico’s
constitutional prohibitions on foreign investment or ownership of Mexico’s energy sector. Other
provisions in the USMCA, such as the investor-state dispute settlement (ISDS) provisions in
regard to Mexico’s energy sector, aim to help protect private U.S. energy projects in Mexico.
U.S. and Canadian investors in Mexico’s energy sector are protected by USMCA’s investment
provisions. Although there were some concerns during the negotiations about the need to protect
U.S. contracts in Mexico’s energy sector, Mexico appears to be legally bound by its 2013
constitutional energy reforms in the energy sector. In 2013, the Mexican Congress approved
constitutional reforms to restructure Mexico’s state-owned oil company, PEMEX, as a “state
productive company,” which means that despite being owned by the state, it competes in the
market like any private company.22 It has operational autonomy, in addition to its own assets.
Mexican President Andrés Manuel López Obrador, however, has made efforts to reverse some of
the 2013 energy reforms, which could be a violation of its USMCA commitments.23
In regard to Canada, negotiators addressed a so-called “proportionality” provision contained in
the energy chapters of both CUSFTA and NAFTA, which required Canada to export a fixed share
of its energy production to the United States even in times of energy shortages. USMCA
eliminated this commitment.24
Government Procurement
FTA government procurement provisions set standards and parameters for government purchases
of goods and services.25 Government procurement chapters typically extend national and
nondiscriminatory treatment among parties and promote transparency in the tendering process.
The schedule of commitments provides opportunities for firms of each nation to bid reciprocally
on certain contracts for specified government agencies over a set monetary threshold. The United
States and Canada also have made certain government procurement opportunities available
through similar obligations in the plurilateral WTO Government Procurement Agreement (GPA).
Mexico is currently not a member of the GPA.

21 The World Trade Organization’s (WTO’s) Trade Facilitation Agreement (TFA), if fully ratified, could also affect
trade facilitation among NAFTA parties. Ninety-eight out of a necessary 109 countries have ratified the agreement.
22 Organisation for Economic Co-operation and Development (OECD), Fighting Bid Rigging in Public Procurement: A
Review of the Procurement Rules and Practices of PEMEX in Mexico, 2016, p. 11.
23 On July 20, 2022, the United States requested consultations with Mexico under USMCA over a series of efforts by
the Mexican government to reverse reforms undertaken in 2013 to liberalize the country’s energy sector. Canada later
joined as a party in these consultations. For more information, see Office of the United States Trade Representative,
United States Requests Consultations Under the USMCA Over Mexico’s Energy Policies, Press Release, July 20, 2022.
24 Canadian Labour Congress, “13 Facts You Need to Know About the United States-Mexico-Canada Agreement
(USMCA),” October 18, 2018.
25 For more information of U.S. government procurement and international trade, see CRS Report R47243, U.S.
Government Procurement and International Trade, by Andres B. Schwarzenberg.
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The USMCA government procurement chapter only applies to procurement between Mexico and
the United States. It is the first U.S. FTA not to include procurement commitments for all parties.
Procurement opportunities between the United States and Canada continue to be covered by the
plurilateral WTO GPA, as long as both countries remain members of the agreement. USMCA
carries over much of the NAFTA government procurement chapter’s coverage for U.S.-Mexico
procurement. Core provisions include the following:
• Promote transparency in the tendering process through online tender information
and descriptions.
• Provide online application and documentation processes without cost to the
applicant.
• Provide for publication of post-award explanations of procurement decisions.
• Exclude government procurement from the financial services chapter.
• Exclude textile and apparel procured by the Transportation Security
Administration (TSA) under the “Kissell Amendment.”
• Allow Mexico to set aside annual procurement contracts of $2.328 billion,
annually adjusted for inflation, to Mexican suppliers.
• Allow for coverage of build-operate-transfer (BOT) contracts. (As Mexico has
taken an exception to this provision, the United States will extend this coverage
to Mexico when Mexico reciprocates.)
The exclusion of Canada is a break from previous government procurement chapters in U.S.
FTAs. As noted above, procurement opportunities in each country for U.S. and Canadian firms
will continue to be covered by the GPA. The national treatment and transparency provisions are
common to both the GPA and USMCA, as are the provisions modernizing the agreement to
provide for online tendering. Government procurement between Canada and Mexico will
continue to be covered by the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP or TPP-11).26
Investment
U.S. FTAs, including bilateral investment treaties (BITs), maintain core investor protections
reflecting U.S. law, such as obligations for governments to provide investors from FTA or BIT
countries with nondiscriminatory treatment, a minimum standard of treatment, and protections
against uncompensated expropriation, among other provisions.27
USMCA provisions, in general, track those of NAFTA and other U.S. FTAs, with the exception of
the elimination of some investor-state dispute settlement (ISDS) provisions (See “Investor-State
Dispute Settlement (ISDS)” below). USMCA clarifies language related to national treatment and
most-favored-nation treatment. In determining whether an investment is afforded national
treatment in the context of expropriation, a “like circumstances” analysis can be used. Under the
article, “like circumstances … depends on the totality of the circumstances including whether the

26 See CRS In Focus IF12078, CPTPP: Overview and Issues for Congress, by Cathleen D. Cimino-Isaacs.
27 See CRS In Focus IF11167, USMCA: Investment Provisions, by Christopher A. Casey and M. Angeles Villarreal and
CRS In Focus IF10052, U.S. International Investment Agreements (IIAs), by Martin A. Weiss and Shayerah Ilias
Akhtar.
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relevant treatment distinguishes between investors or investments on the basis of legitimate
public welfare objectives.”28
Minimum Standard of Treatment (MST)
USMCA, like NAFTA, requires parties to provide MST to investments in accordance with
applicable customary international law, including fair and equitable treatment and full protection
and security. It defines the applicable standard of treatment for a covered investment as the
customary international law MST of aliens, and that “fair and equitable treatment” (due process)
and “full protection and security” (police protection) do not create additional substantive rights.
USMCA clarifies that a party’s action (or inaction) that may be inconsistent with investor
expectations is not, on its own, a breach of MST, even if loss or damage to the investment
follows.
Performance Requirements
USMCA prohibits parties from imposing specific “performance requirements” in connection with
an investment or related to the receipt of an advantage in connection with it. These include
prohibitions on performance requirements, such as to export a given level or percentage of goods,
achieve a given level or percentage of domestic content, or transfer a particular technology. A
new feature includes prohibitions on performance requirements related to the purchase, use, or
according of a preference to a technology of the party (or of a person of the party), and related to
certain royalties and license contracts.
Denial of Benefits
USMCA’s denial of benefits article, among other things, permits a party to deny the investment
chapter’s benefits to an investor that is an enterprise of another party (and to the investments of
that investor) if that enterprise is owned or controlled by a person of a non-party or of the denying
party or does not have “substantial business activities” in the territory of any party other than the
party denying benefits. This article presumably is intended to address some stakeholder concerns
that the chapter could be used to afford shell companies access to its protections.
Government Right to Regulate
Unlike NAFTA, USMCA contains a provision stating that, except in rare circumstances,
nondiscriminatory regulatory action by a party to protect legitimate public welfare objectives
(e.g., in public health, safety, and the environment) do not constitute indirect expropriation. The
USMCA includes a statement that nothing in the Investment Chapter shall be construed to prevent
a government from regulating in a manner sensitive to “health, environmental, and other
regulatory objectives,” as long as the action taken is otherwise consistent with the chapter.
Investor-State Dispute Settlement (ISDS)
ISDS was a controversial aspect of the NAFTA investment chapter. It is a form of binding
arbitration that allows private investors to pursue claims against sovereign nations for alleged
violations of the investment provisions in trade agreements. It was included in NAFTA and is in
nearly all other U.S. FTAs that have been enacted since then; it is also a core provision in U.S.
bilateral investment treaties (BITs). Generally, ISDS tribunals are composed of three lawyer-

28 USMCA Article 14.5.4.
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arbitrators: one chosen by the claimant investor, one by the respondent country, and one by
mutual decision between the two parties. Most cases follow the rules of the World Bank’s Centre
for Settlement for Investor Dispute or the United Nations Commission on International Trade
Law.
ISDS provisions in USMCA substantially revise longstanding provisions in NAFTA, other U.S.
FTAs, and current BITs that were actively sought by past Administrations. Significantly, USMCA
ended ISDS between Canada and the United States, and between Canada and Mexico. U.S. and
Mexican investors are not able to bring USMCA arbitration claims against Canada, nor are
Canadian investors able to bring such claims against the United States or Mexico. Canada and
Mexico are maintaining ISDS among themselves through CPTPP.
For ISDS between the United States and Mexico, USMCA maintains similar provisions
applicable under NAFTA regarding government contracts that belong to five covered sectors,
including oil and gas, power generation, telecommunications, transportation, and infrastructure.
This use of ISDS is designed to protect investors in heavily regulated industries whose
investments may be affected by the presence of state-owned enterprises in the covered sectors.
For all other foreign investors, USMCA ISDS provisions are more limited than those of NAFTA.
Investors must first defend their claims in local courts before initiating arbitration. Direct
expropriation claims, including claims of violation of national treatment, will continue to be
eligible for arbitration for United States and Mexican investors under USMCA, provided that the
claimants exhaust domestic remedies first. Indirect expropriation, in which an action or series of
actions by a party has an effect equivalent to direct expropriation without formal transfer of title
or outright seizure, is no longer covered.
Services
The United States has a highly competitive services sector and has made services trade
liberalization a priority in its negotiations of FTAs, including USMCA. USMCA continues
NAFTA’s inclusion of core obligations in services trade in a separate services trade chapter. It
also covers services trade in other related chapters, including financial services and
telecommunications, as did NAFTA. USMCA retains NAFTA’s “negative list” in which all
services are covered under the agreement unless specifically excluded from it, or unless parties
reserved a service to domestic providers at the time of the agreement. This approach generally is
considered to be more comprehensive than the “positive list approach” used in the WTO General
Agreement on Trade in Services (GATS), which requires each covered service to be identified.
The negative list approach also implies that any new type of service that is developed after the
agreement enters into force is automatically covered unless it is specifically excluded.
Key provisions of the services chapter in USMCA include the following:
• Nondiscriminatory treatment of services from partner-country providers in like
circumstances, including national treatment and MFN treatment.
• No limitations on the number of service suppliers, the total value or volume of
services provided, the number of persons employed, or the types of legal entities
or joint ventures that a foreign service supplier may employ.
• Prohibition on locality requirements that a service provider maintain a
commercial presence in the country of the buyer.
• Support of mutual recognition of professional qualifications for certification of
service providers.
• Transparency in the development and application of government regulations.
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• Allowance for payments and transfers of capital flows “freely and without delay”
that relate to the provision of services, with permissible restrictions in some cases
for bankruptcy and criminal offences.
Express Delivery
NAFTA did not contain commitments on express delivery; however, the United States made
market access of express delivery services a priority in its more recent FTA negotiations. USMCA
addresses express delivery in a chapter annex.29 The commitments on express delivery focus, in
particular, on cases where a government-owned and operated postal system provides express
delivery services competing with private sector providers. USMCA stipulates that the postal
system cannot use revenue generated from its monopoly power in providing postal services to
cross-subsidize an express delivery service. USMCA also requires independence between express
delivery regulators and providers, prohibits the requirement of providing universal postal service
as a prerequisite for express delivery, and prohibits fees on express delivery providers for the
purpose of funding other such providers. In addition, USMCA specifies a threshold level for the
customs de minimis, a critical commitment for express delivery providers and small businesses as
shipments valued below the de minimis receive expedited customs treatment and pay no duties or
taxes.
Temporary Entry for Business Purposes
In addition to cross-border trade in services, a person supplying the service may travel to and
provide certain services in the location where the service is performed. USMCA retains NAFTA’s
commitments on temporary entry for service professionals, such as accountants, architects, legal,
and medical providers, and other business personnel, in order to facilitate such trade. As
temporary entry has been a controversial issue in the context of previous trade agreements, the
USMCA chapter on temporary entry largely replicates NAFTA’s provisions. USMCA does not
place new restrictions on the number of entrants or expand the list of eligible professionals, as
many businesses and other service providers had hoped.
Financial Services
Financial services, including insurance and insurance-related services, banking and related
services, as well as auxiliary services of a financial nature, are addressed in a separate USMCA
chapter as in previous U.S. FTAs. The financial services chapter adapts relevant provisions from
the foreign investment chapter and the cross-border trade in services chapter. The prudential
exception in both USMCA and NAFTA provides that nothing in the FTA would prevent a party to
the agreement from imposing measures to ensure the integrity and stability of the financial
system. As with NAFTA and other FTAs, USMCA distinguishes between financial services
traded across borders and those sold by a provider with a commercial presence in the home
country of the buyer. In the case of providers with a foreign commercial presence, the USMCA
applies the negative list approach with commitments applying generally except where noted; in
the case of cross-border trade, the language limits coverage to a positive list of specific banking
and insurance services as defined by each country.30

29 USMCA, Annex 15-A.
30 See USMCA Annex 17-A for a complete listing of insurance, banking, and other financial services covered by the
cross-border trade in financial services disciplines.
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NAFTA allowed the transfer of data in and out of a party in the ordinary course of business.
USMCA strengthens the language to protect the free flow of data and removes the carve-out
provided that a party’s financial regulatory authorities have “for regulatory and supervisory
purposes, immediate, direct, complete, and ongoing access” to data located in another party’s
territory.31
USMCA also includes commitments on electronic payment card services. It requires that each
party allow for the supply, by persons of other parties, of electronic payment services for payment
card transactions, defined by each country, generally including credit and debit cards. The
provisions on card services, however, allow for certain preconditions of access, including
requiring a representative or office within country.
Other new USMCA financial services provisions include the following:
• Excluding government procurement from financial services disciplines.
• Modifying investor-state dispute settlement (ISDS) through a bilateral annex on
Mexico-United States Investment Disputes in Financial Services.
• Allowing a financial institution from one party with a presence in a second party
to have access to the latter’s payment and clearance system.
• Protecting source code and algorithms and prohibiting forced technology transfer
in the digital trade section.
Telecommunications
The telecommunication chapter in NAFTA required regulatory transparency; interconnection
among providers; reasonable and nondiscriminatory access to network infrastructure and
government-controlled resources like spectrum bandwidth for reasonable rates; and protection of
the supplier’s options for employing technology. The USMCA telecommunications chapter
adopts these provisions and is the first U.S. FTA to cover mobile service providers. The chapter
promotes cooperation on charges for international roaming services and allows regulation for
mobile roaming service rates. Other provisions aim to ensure that suppliers can resell and
unbundle services, and that suppliers can furnish value-added services. The chapter promotes the
independence of regulators. It does not cover television or radio broadcast or cable suppliers and
does not contain the provision in NAFTA recognizing the importance of international standards
for global compatibility and interoperability.
The chapter has the effect of binding the Mexican government to its 2013 Constitutional reforms,
which established a telecommunications regulatory framework to encourage competition,
investment and an independent regulatory regime, in addition to nondiscriminatory repurchase
rates and interconnection obligations. USMCA does not affect Canadian restrictions on foreign
ownership of telecommunications common carriers.
Digital Trade
NAFTA was negotiated and came into effect at the dawn of the consumer Internet age, and did
not contain provisions to address barriers and rules and disciplines on digital trade. Congress
established principal negotiating objectives in TPA-2015 on digital trade in goods and services, as
well as on cross-border data flows. The objectives included equal treatment of electronically
delivered goods and services, as compared to physical products, protection of cross-border data

31 USMCA Article 17.18.
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flows, and prevention of data localization regulations, as well as prohibitions on duties on
electronic transmissions.
The USMCA digital trade chapter broadly covers all industries, but explicitly excludes
government procurement or provisions on data held or processed by governments of the parties. It
also does not include financial services, which has separate obligations in the financial services
chapter. Overall, the chapter aims to promote digital trade and the free flow of information, and to
ensure an open Internet. While the majority of the obligations related to digital trade are found in
the digital trade chapter, there are relevant provisions in other chapters, including financial
services, IPR, and telecommunications.
Key provisions of the USMCA digital trade chapter:
• Ensure nondiscriminatory treatment of digital products.
• Prohibit cross-border data flow restrictions and data localization requirements.
• Prohibit requirements for source code or algorithm disclosure or transfer as a
condition for market access, with exceptions.
• Prohibit customs duties or other charges for electronically transmitted products.
• Require parties to have online consumer protection and anti-spam laws, and a
legal framework on privacy.
• Promote cooperation on cybersecurity, and risk-based strategies and consensus-
based standards over prescriptive regulation in combating cybersecurity risks and
events.
• Prohibit imposition of liability for harms against Internet services providers or
users related to information stored, processed, transmitted, distributed, or made
available by the service, with the exclusion of ISP liability for intellectual
property rights (IPR) infringement.
• Promote publication of open government data in machine readable format for
public usage.
Intellectual Property Rights (IPR)
NAFTA was the first FTA to contain an IPR chapter, which was the model for the WTO Trade-
Related Aspects of Intellectual Property Rights (TRIPs) Agreement that came into effect in
1995.32 IPR chapters in trade agreements include provisions on patents, copyrights, trademarks,
trade secrets, geographical indications (GIs), and enforcement. U.S. FTAs contain obligations in
general that have followed the TPA negotiating objective that agreements should reflect U.S. law.
Patents
Patents protect new innovations, such as pharmaceutical products, chemical processes, business
technologies, and computer software. USMCA provisions largely track with provisions in more
recent U.S. FTAs:
• Patentable subject matter. USMCA provides that patents be made available for
any invention, whether product or process, in all field of technology, provided

32 See CRS In Focus IF10033, Intellectual Property Rights (IPR) and International Trade, by Shayerah I. Akhtar and
Liana Wong.
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that an invention is new, involves an inventive step, or is capable of industrial
application.
• Patent and regulatory term extension. Provides an extension for
“unreasonable” delays in the patent examination or regulatory approval
processes. NAFTA allowed countries to provide such an extension but did not
define unreasonable. USMCA defines unreasonable for patent delays as five
years after the filing of the application, or three years after a request for
examination has been made.
• Patent linkage. Mandates notification to the patent holder when a generic
manufacturer seeks to rely on an originator’s test data for marketing approval,
and obligates the marketing authority to prevent a generic manufacturer from
seeking market approval without the
rights holder’s consent. It provides
IPR Highlights in USMCA
flexibility on the notification system
Digital enforcement. Extends IPR enforcement,
and the procedures (e.g., judicial or
including for copyrights, to the digital environment.
administrative proceedings, and
Trade secrets. Requires criminal procedures and
remedies, such as preliminary
penalties for trade secret theft, including cybertheft;
injunctions) for a patent holder to
also clarifies that SOEs are subject to trade secret
protection requirements.
assert their rights, as well as for a
Internet Service Providers (ISPs). Requires
party to challenge the patent’s validity.
“notice and takedown” to address ISP liability while
This provision was not in NAFTA, but
allowing an alternative system to remain for Canada
has been in more recent U.S. FTAs.
(e.g., “notice and notice”).
• Protection of test data. Protects test
Trademarks. Extends trademark protection to
sounds and to “col ective marks” and removes
data that patent holders submit for
administrative requirements to enable easier protection
regulatory approval for
and enforcement of trademarks.
pharmaceuticals on which generics
Geographical indications (GIs). Requires
may later rely. These provisions were
administrative procedures for recognizing and opposing
not in NAFTA. USMCA provisions
GIs, including guidelines for determining when a name
are described below.
is common. Also, for GIs that a Party protects through

international agreements, includes requirements on
• Chemical-based (small-molecule) transparency and opportunity to comment or oppose
drugs. USMCA provides five
GI recognition.
years of data exclusivity for new
drugs, and three years for new formulations of existing drugs.
• Biologics. The final USMCA text does not have provisions on data
exclusivity for biologic drugs. USMCA parties originally negotiated a ten-
year period of data exclusivity for biologic drugs, but later removed these
provisions due to concerns among some Members of Congress.33 U.S. law
provides 12 years of data exclusivity for biologics, while Canada provides a
total of eight years of biologics exclusivity and Mexico provides a five-year
exclusivity period for both chemicals and biologics. Some policymakers
were concerned that the negotiated ten-year data exclusivity period would
have caused prescription drug prices to rise to unaffordable levels. Industry
stakeholders claim that the changes to USMCA do not protect U.S.

33 Rachel Cohrs, “Biologic Exclusivity Provision Stripped from Revised USMCA Deal,” Modern Healthcare,
December 10, 2019.
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intellectual property and could adversely affect U.S. jobs and U.S. medical
innovation.34
Copyrights
Copyrights provide artistic and literary creators with the exclusive right to authorize or prohibit
others from reproducing, communicating, or distributing their works. USMCA attempts to
balance copyright protections while protecting the free flow of information, and addresses digital
trade through the following:
• Extension of copyright terms. Extends copyright terms from 50 years after
death of the author, or 50 years from the publication (the WTO standard) to a 70-
year period. Extends to 75-years corporate works.
• Technological protection measures. Prohibits circumventing technological
protection measures (TPMs), such as encryption, or altering or disabling rights
management information (RMI).
• Limitation and exceptions. Confines “limitations and exceptions” to “certain
special cases that do not conflict with the normal exploitation of the work … and
do not unreasonably prejudice the legitimate interests of the rights holder.”
• “Safe harbor.” Protects internet service providers (ISPs) against liability for
digital copyright infringement, provided ISPs address intermediary copyright
liability through “notice and takedown” or alternative systems (e.g., “notice and
notice” in Canada). Rights-holder groups sought to limit what they considered
“overly broad safe harbor provisions,” while technology and business groups
favored retention.
Trademarks
Trademarks protect distinctive commercial names, marks, and symbols. USMCA includes
provisions on trademark protection and enforcement and provides for the following:
• Sound and scent marks. Extends trademark protection to sounds and requires
“best efforts” to register scents. (Under NAFTA, a party could require that marks
be “visually perceptible” in order to be registered.)
• Certification and collective marks. Provides trademark protections to
“certification marks” (e.g., such as the Underwriters’ Laboratory or Good
Housekeeping Seal) and adds protection for “collective marks.” Certification
marks are usually given for “compliance with defined standards,” while
collective marks are usually defined as “signs which distinguish the geographical
origin, material, mode of manufacture or other common characteristics of goods
or services of different enterprises using the collective mark.”35
• Well-known trademarks. Extends specific protections for “well-known marks”
to dissimilar goods and services, whether or not registered, so long as the use of
the mark would indicate a connection between the goods or services and the

34 Ibid.
35 For more information on these marks, see World Intellectual Property Organization (WIPO), “Collective Marks as a
Tool for Development,” at https://www.wipo.int/collective-marks/en/, and
https://www.wipo.int/sct/en/comments/pdf/sct21/cert_uk.pdf.
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owner of the well-known mark and the trademark owner’s interests are likely to
be damaged by the use.
• Domain names. Requires each party to have a system for managing its country-
code top level domains (ccTLDs) and to make available online public access to a
database of contact information for domain-name registrants. USMCA requires
parties to make available appropriate remedies when a person registers or holds,
with “bad faith intent to profit,” a domain name that is identical or confusingly
similar to a trademark. This provision is intended to protect against what is often
referred to as “cybersquatting.”
Trade Secrets
Trade secrets are confidential business information (e.g., formula, customer list) that are
commercially valuable. USMCA parties agreed to require criminal and civil procedures and
penalties for trade secret theft, prohibition on impeding licensing of trade secrets, protections for
trade secrets during the litigation process, and penalties for government officials who wrongfully
disclose trade secrets, including through cyber theft and by state-owned enterprises (SOEs).
Geographical Indications (GIs)
GIs are geographical names that protect the quality and reputation of a distinctive product from a
region (e.g., Mexican Tequila, Canadian Whisky). In FTA negotiations, the United States has
sought to limit GI protections that can improperly constrain U.S. agricultural market access in
other countries by protecting terms viewed as “common.” USMCA:
• Protects GIs for food products that Canada and Mexico have already accepted as
a consequence of trade agreements with the European Union.
• Provides transparency and notification requirements, and objection procedures,
for new GIs.
• Sets forth guidelines to determine whether a term is customary in the common
language.
IPR Enforcement
Like previous U.S. FTAs, the USMCA commits parties to provide civil, criminal, and other
national enforcement for IPR violations, such as copyright enforcement in the digital
environment, criminal penalties for trade secret theft and camcording, and ex-officio authority to
seize counterfeit trademark and pirated copyright goods at the border. The provisions of the
chapter, in turn, are enforceable through the state-to-state dispute settlement chapter.
Cultural Exemption
Since the U.S.-Canada FTA, Canada has taken an exclusion on cultural industries from national
treatment and MFN treatment. This exclusion reflects the Canadian government’s attempts to
promote a distinctly Canadian culture and the fear that, without its support, American culture
would come to dominate Canada. Thus, the government imposes Canadian content (“Cancon”)
requirements on radio and television broadcasts, cable and satellite diffusion, the production of
audio-visual material, film or video recording, and on various print media. The U.S.
entertainment industry, in particular, has long sought to have this provision eliminated. In the end,
Canada prevailed and the exclusion remains in USMCA, although a provision was inserted
allowing the United States and Mexico to take reciprocal action.
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State-Owned Enterprises (SOEs)
USMCA includes a new chapter on SOEs, requiring SOEs to act in accordance with commercial
considerations and to provide nondiscriminatory treatment to other USCMA country firms. The
provisions update NAFTA by ensuring that SOEs compete on a commercial basis, and that the
advantages SOEs receive from their governments, such as subsidies, do not have an adverse
impact on U.S. workers and businesses. The renegotiations addressed potential commercial
disadvantages to private sector firms from state-supported competitors receiving preferential
treatment.36
NAFTA included provisions on SOEs, but they were limited in scope.37 They allowed parties to
maintain or establish SOEs, while requiring that any enterprise owned or controlled by a federal,
provincial, or state government must act in a manner consistent with that country’s obligations
when exercising regulatory, administrative, or other government authority, such as the granting of
licenses. NAFTA committed parties to ensure that any SOEs accord nondiscriminatory treatment
in the sale of goods or services to another party’s investment in that territory.
U.S. government and business stakeholders raised concerns during USMCA negotiations about
competing with companies linked to the state through ownership or influence. As a result, they
support new specific disciplines in USMCA to address such competition. Some legal analysts
contend that USMCA limits the definition of expropriation so as to protect against “direct”
expropriation only, and that it does not protect interests against indirect expropriation.38 Indirect
expropriation occurs when a state’s regulatory actions could take effective control of—or
interfere with—an investment.
Labor
The rationale for including labor provisions in U.S. FTAs is to help ensure that countries not
derogate from labor laws to attract trade and investment and that liberalized trade does not give a
competitive advantage to countries due to a lack of adequate standards. NAFTA marked the first
time that worker rights provisions were associated with an FTA.39 It contained 11 “guiding
principles” pertaining to worker rights. Other provisions involved technical assistance, capacity
building, and separate dispute procedures, along with a labor cooperation mechanism.
Worker rights provisions in U.S. trade agreements have evolved significantly since NAFTA.40
More recent U.S. FTAs incorporated internationally recognized labor principles requiring parties
to adopt and maintain in their statutes and regulations core labor principles of the International
Labor Organization (ILO) (ILO Declaration, see Text Box). They also require countries to
enforce their labor laws and not to waive or derogate from those laws to attract trade and
investment. These provisions are enforceable under the same dispute settlement procedures that

36 USTR, Updating the North American Free Trade Agreement (NAFTA), available at https://ustr.gov/sites/default/
files/TPP-Upgrading-the-North-American-Free-Trade-Agreement-NAFTA-Fact-Sheet.pdf.
37 The definition of a State-Owned Enterprise in the agreement is an enterprise principally engaged in commercial
activities and in which a party’s government directly or indirectly owns more than 50% of capital share, controls more
than 50% of voting rights, holds the power to control the enterprise through any other ownership interest including
indirect or minority ownership, or holds the power to selects a majority of board members.
38 Julie Bedard, David Herlihy, and Timothy G. Nelson, The United States-Mexico-Canada Agreement Significantly
Curtails Foreign Investment Protection, Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, October 2, 2018.
39 NAFTA’s labor provisions were in a side agreement called the North American Agreement on Labor Cooperation
(NAALC).
40 See CRS In Focus IF10046, Worker Rights Provisions in Free Trade Agreements (FTAs), by Cathleen D. Cimino-
Isaacs and M. Angeles Villarreal.
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apply to other provisions of the FTA, and violations are subject to the same potential trade
sanctions.
ILO Declaration on Fundamental Principles and Rights at Work (1998)
•
Freedom of association.
•
Effective recognition of the right to col ective bargaining.
•
Elimination of all forms of compulsory or forced labor.
•
Effective abolition of child labor.
•
Elimination of discrimination in respect of employment and occupation.
USMCA includes components of more recent U.S. FTAs that strengthen labor provisions and
provide recourse to the same dispute settlement mechanism as other parts of the agreement.
Unlike NAFTA, it requires parties to not only enforce their own laws, but also to adopt and
maintain specific laws related to the ILO Declaration. It requires parties to
• Adopt and maintain in statutes and regulation, and practices, worker rights as
stated in the ILO Declaration of Rights at Work, in addition to acceptable
conditions of work with respect to minimum wages, hours of work, and
occupational safety and health.
• Not waive or otherwise derogate from the party’s statues or regulations.
• Not fail to effectively enforce labor laws through a sustained or recurring course
of action or inaction in a manner affecting trade or investment between parties.
• Promote compliance with labor laws through appropriate government action such
as appointing and training inspectors or monitoring compliance and investigating
suspected violations.
• Prohibit imports of goods made by forced labor, and commit to protections
regarding violence against workers, migrant workers, and workplace
discrimination.
• Recognize the sovereign right of each party to establish its own levels of labor
law enforcement activities in the territory of another party.
• Acknowledge a party’s right to exercise discretion with regard to labor
obligations.
USMCA Amendment: Labor Provisions
After USMCA negotiations had been completed, several Members of Congress remained
concerned about the agreement’s enforcement mechanism. They argued that the original text was
not strong enough to protect worker rights and they pressed with the Administration to negotiate
amendments to the agreement with Mexico and Canada. Key amendments included the
following:
• Prevention of panel blocking in the Dispute Settlement Chapter of USMCA.
Ensures the formation of a panel in dispute cases where a party refuses to
participate in the selection of panelists.
• “In a Manner Affecting Trade and Investment.” Shifts the burden of proof by
stating that an alleged violation affects trade and investment, unless otherwise
demonstrated.
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• Rapid Response Mechanism. Adds a new rapid response mechanism to provide
for an independent panel investigation of denial of certain labor rights at
“covered facilities,” as opposed to a government inspection.
Mexico’s Labor Reform Commitments
USMCA Annex 23-A in the labor chapter commits Mexico to enact legislative action in regard to
its labor laws, similar to the Mexican government’s May 2019 reforms. Specifically, Annex-23A
commits Mexico to
• Eliminate all forms of forced or compulsory labor.
• Protect the right of workers to organize, form, and join the union of their choice.
• Prohibit employer interference in union activities, discrimination, or coercion
against workers.
• Provide for the exercise of a personal, free, and secret vote of workers for union
elections and agreements.
• Establish and maintain independent and impartial bodies to register union
elections and resolve disputes relating to collective bargaining agreements.
• Establish independent labor courts.
USMCA implementing legislation creates a new interagency committee, labor attachés, and
reporting requirements to Congress on Mexico’s implementation of labor reforms.
Mexico’s 2019 Labor Reforms
On May 1, 2019, Mexico’s president codified a labor reform bil that secured stronger worker’s rights adjacent to
labor standards set forth by USMCA Chapter 23 on labor, and Annex 23-A, which addresses worker
representation in col ective bargaining in Mexico. The reforms include new enforcement mechanisms to ensure
free and fair union elections, and also created an independent labor court system called the Federal Center for
Conciliation and Labor Reform (CFCRL) to resolve future disputes between union workers and employers. The
reform brought changes to Mexico’s existing protectionist contract system, which allowed workplace leadership
to sign col ective bargaining agreements (CBAs) with unrepresentative unions without consent from employees.
Notably, the reform further required all pre-existing CBA’s to be dissolved and/or subject to vote through secret
ballot for approval by May 1, 2023. According to the Mexican government, approximately 29,000 unions have been
legitimized through the government of Mexico as a result of the reforms, with an additional 1,200 stil in progress.
The Mexican government also confirmed that 747 new col ective contracts have been registered in accordance
with the new labor model, as of August 2023. The Mexican Labor Department intends to nul ify all unaccounted-
for labor contracts, which as of May 2023, was approximately 20,000 contracts.
Sources: CRS In Focus IF11308, USMCA: Labor Provisions, by M. Angeles Vil arreal and Cathleen D. Cimino-
Isaacs; Gobierno de Mexico, “Contratos Colectivos de Trabajo (CCT),” at https://centrolaboral.gob.mx/listado-
cct-nuevos-reforma/.
Environment
As with labor and worker rights, NAFTA was the first U.S. FTA associated with environmental
protection. The North American Agreement on Environmental Cooperation (NAAEC) required
all parties to enforce their own environmental laws, and contained an enforcement mechanism
applicable to a party’s failure to enforce these laws. NAAEC included a consultation mechanism
for addressing disputes with a special dispute settlement procedure. Subsequent FTAs included a
similar environmental chapter within the main text of the agreement, including a country’s
obligations to enforce their own laws.
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More recent U.S. FTAs added an affirmative obligation for FTA partner countries to adhere to
multilateral environmental agreements (MEAs) and allowed for environmental disputes under the
FTAs to access the main dispute settlement provisions of the agreement. The USMCA
environment chapter obligates each party to
• Not fail to effectively enforce its environmental laws through a sustained or
recurring course of action or inaction to attract trade and investment.
• Not waive or derogate from such laws in a manner that weakens or reduces the
protections afforded in those laws to encourage trade or investment.
• Ensure that its environmental laws and policies provide for and encourage high
levels of protection.
• Strive to improve its levels of environmental protection.
• Require parties to adopt and maintain statutes and regulations consistent with
multilateral environmental agreements to which each is a party.
• Recognize the sovereign right of each party to establish its own levels of
domestic environmental protection, its own regulatory priorities, and to adopt or
modify its priorities accordingly.
• Acknowledge a party’s right to exercise discretion with regard to enforcement
resources.
• Provide for the resolution of disputes.
• Provide a mechanism to implement the agreement.
USMCA directly or implicitly addresses obligations under major MEAs. It also includes
obligations and encouragements to protect the ozone layer, protect the marine environment from
ship pollution, encourage conservation and sustainable use of biodiversity, encourage sustainable
fisheries management and require the control, reduction, and eventual elimination of subsidies
that lead to overfishing or overcapacity. The USMCA does not contain language on climate
change.
USMCA Amendment: Environmental Provisions
The Protocol of Amendment to USMCA clarified some of the existing environmental language in
the agreement and addressed some perceived shortcoming in the original USMCA text, such as
• Asserting the presumption that an environmental dispute affects trade and
investment unless a respondent party can prove otherwise.
• Requiring each party specifically to adopt, maintain, and implement laws,
regulations and other measures to fulfill the following MEAs to which they are a
party:
• Convention on International Trade in Endangered Species of Wild Flora and
Fauna (CITES)
• Montreal Protocol on Substances that Deplete the Ozone Layer
• International Convention for the Prevention of Pollution from Ship
(MARPOL)
• Ramsar Convention on Wetlands
• Convention on Antarctic Marine Living Resources
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• International Whaling Convention
• Inter-American Tropical Tuna Convention
The USMCA, as originally signed, only made explicit reference to CITES, MARPOL, and the
Montreal Protocol. USMCA implementing legislation creates an Interagency Environment
Committee for Monitoring and Enforcement, analogous to the labor chapter, and establishes
environment-focused attachés in Mexico City to monitor compliance with the agreement. In
addition, the implementing legislation includes measures for authorizing grants under the U.S.-
Mexico Border Water Infrastructure Program, the Trade Enforcement Trust Fund and a
recapitalization of the North American Development Bank (NADB).
Dispute Settlement
Dispute settlement provisions in U.S. FTAs, as well as the WTO, provide for the resolution of
disputes arising under the agreement. These provisions are in addition to procedures with regard
to investor-state dispute resolution (see “Investor-State Dispute Settlement”). Similar to NAFTA,
the USMCA dispute settlement provisions are designed to resolve disputes in a cooperative
manner. A party first seeks redress of a grievance through a request for consultation with the other
party. These steps include
• Initial consultations between the parties.
• Good offices, conciliation, or mediation (if no resolution).41
• Establishment of a dispute settlement panel.
Panels are composed of five members; each side appoints two and a chair is appointed by mutual
consent of the parties. Failing that, the disputing party selected by lot makes the decision. After
the panel renders its decision, the unsuccessful party is expected to remedy the measure or
practice under dispute. If it does not, the aggrieved party may seek compensation, suspension of
benefits, or fines. In cases in which a dispute is common to both WTO and FTA rules, a party can
choose the forum in which to bring the dispute (i.e., at the WTO or before a USMCA panel), but
cannot bring the dispute to multiple fora.
Under NAFTA, a party had the ability to block a panel chair—and, consequently, a panel—from
forming, which was seen by some as a shortcoming of the agreement. Only three state-to-state
dispute resolution panels were completed under NAFTA (between 1994 and 2001). Because the
United States was able to block a panel chair, a fourth case (Restrictions on Sugar from Mexico)
was never considered.42 The Protocol of Amendment to USMCA addressed the panel blocking
issue by inserting language that would eliminate the ability of a responding party to block the
establishment of a panel through refusal to participate in the panel establishment procedure. It
revised the guidelines for the Rules of Procedure for panels to give the parties the right to submit
testimony, the right to test the veracity of submitted testimony, the right to submit anonymous
testimony, and for the panel to accept agreed stipulations prior to a hearing, among other issues.
In order to speed up dispute settlement, the amendment eliminated the consultative role of the

41 The expression “good offices” denotes conciliation and mediation before resorting to arbitration. For more
information, see USMCA Chapter 31 on Dispute Settlement at https://ustr.gov/issue-areas/enforcement/dispute-
settlement-proceedings/fta-dispute-settlement/usmca/chapter-31-disputes.
42 For more information, see CRS In Focus IF11418, USMCA: A Legal Interpretation of the Panel-Formation
Provisions and the Question of Panel Blocking, by Nina M. Hart and CRS In Focus IF10645, Dispute Settlement in the
WTO and U.S. Trade Agreements, by Christopher A. Casey and Cathleen D. Cimino-Isaacs.
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USMCA Free Trade Commission, which acts as a secretariat for the agreement, as an
intermediate step to resolve disputes.
Some USMCA chapters or sections are not subject to dispute settlement including the
• Good Regulatory Practices chapter;
• Competition Policy chapter;
• Competitiveness chapter;
• Small and Medium-Sized Enterprise chapter;
• Transparency and Procedural Fairness for Pharmaceutical Products and Medical
Devices section of the Publications and Administration chapters; and
• Macroeconomic Policies and Exchange Rate Matters Chapter other than
transparency and reporting obligations that have not been resolved through
consultations.
Binational Review Panels for Trade Remedies
Unlike other U.S. FTAs, NAFTA contained a binational dispute settlement mechanism, which
USMCA retains. USMCA provides disciplines for settling disputes arising from a party’s
statutory amendment of its antidumping (AD) or countervailing duty (CVD) laws, or from a
party’s AD or CVD final determination on the goods of an exporting party.43 The dispute
settlement system originated during the Canada-United States Free Trade Agreement (CUSFTA)
and it was retained under NAFTA.
The binational panel mechanism provides for a review of USMCA parties’ final administrative
determinations in AD/CVD investigations in lieu of judicial review in domestic courts. In cases in
which an aggrieved USMCA country maintains that a partner did not preserve “fair and
predictable disciplines on unfair trade practices,” or asserts that a partner’s amendment to its AD
or CVD law is inconsistent with the WTO Antidumping or Subsidies Agreements,44 the aggrieved
partner may request a judgment from a binational panel rather than through the legal system of
the defending party.45
The United States sought to eliminate the Chapter 19 dispute settlement mechanism during the
USMCA negotiations.46 By contrast, Canada and Mexico expressed support for retaining the
mechanism, with Canada drawing a “red line” firmly opposing its elimination.47 At the end of the
negotiations, the three countries decided to retain the system. NAFTA Chapter 19 is effectively
replicated in the Trade Remedies Chapter of the USMCA.

43 In Canada, AD/CVD investigations on imports are conducted by the Canada Border Services Agency (CBSA, which
makes dumping and subsidy determinations) and the Canadian International Trade Tribunal (CITT, which determines
injury to Canadian industries). In Mexico, both injury (i.e., to Mexican industries) and dumping/subsidy determinations
are made by the Secretaría de Economía, Unidad de Practicas Comerciales Internacionales. U.S. injury determinations
are made by the International Trade Commission (ITC), and the International Trade Administration of the Department
of Commerce investigates and determines the existence and amount of dumping/subsidies.
44 The WTO Antidumping Agreement’s official title is the Agreement on the Implementation of Article VI of the
General Agreement on Tariffs and Trade; and the Subsidies Agreement’s title is the Agreement on Subsidies and
Countervailing Measures. NAFTA pre-dated the entry-into-force of the agreement establishing the WTO by one year.
At the time of the NAFTA negotiations, the multilateral General Agreements on Tariffs and Trade (GATT) was in
force. The GATT was incorporated with revisions into the WTO agreements.
45 CRS In Focus IF10645, Dispute Settlement in the WTO and U.S. Trade Agreements, by Ian F. Fergusson.
46 USTR, Summary of Objectives for the NAFTA Renegotiation, p. 14.
47 “Trudeau: Chapter 19, cultural exemptions are NAFTA red lines for Canada,” Inside U.S. Trade, September 4, 2018.
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Currency Manipulation
For the first time in a U.S. FTA, USMCA includes obligations to guard against currency
manipulation. The parties agreed to “achieve and maintain a market-determined exchange rate
regime,” and to “refrain from competitive devaluation, including through intervention in the
foreign exchange market.” However, only transparency and reporting requirements are subject to
dispute settlement procedures.
The June 2015 TPA included, for the first time, a principal trade negotiating objective addressing
currency manipulation. While neither Canada nor Mexico have been accused of currency
manipulation in the past, the inclusion of a currency manipulation chapter could serve as a
precedent for including such provisions in future FTAs. Over the past decade, policymakers and
policy experts have been concerned that foreign countries may use exchange rate policies to gain
an unfair trade advantage against the United States, or are “manipulating” their currencies.
Specifically, the concern is that other countries may purposefully undervalue their currencies to
boost exports, making it harder for other countries to compete in global markets. They argue that
U.S. companies and jobs have been adversely affected by the exchange rate policies adopted by
China, Japan, and other countries “manipulating” their currencies.48 Some economists are
skeptical about currency manipulation and whether it is a significant problem. They raise
questions about whether government policies have long-term effects on exchange rates, whether
it is possible to differentiate between “manipulation” and legitimate central bank activities, and
the net effect of alleged currency manipulation on the U.S. economy.49
Regulatory Practices
Nontariff barriers, including discriminatory and unpredictable regulatory processes, can be an
impediment to market access for U.S. goods and services exports. NAFTA included broad
provisions on regulatory practices in several chapters, including the Customs Procedures,
Financial Services, and Energy chapters, but did not have a specific chapter on regulatory
practices. USMCA has a new, separate chapter on regulatory practices with commitments to
promote regulatory quality through greater transparency, objective analysis, accountability, and
predictability to facilitate international trade, investment, and economic growth. The chapter
states that the application of good regulatory practices can support the development of compatible
regulatory approaches among the parties, and reduce or eliminate unnecessarily burdensome,
duplicative, or divergent regulatory requirements. Such commitments could complement ongoing
efforts and include increased transparency in the development and implementation of proposed
regulations, opportunities for public comment in the development of regulations, and/or the use of
impact assessments and other methods to ensure regulations are evidence-based and current.50
NAFTA and USMCA provisions on regulatory practices may have influenced the United States,
Canada, and Mexico to increase cooperation on economic and security issues through various
endeavors such as the North American Leaders’ Summits, the North American Trusted Traveler
Program, the U.S.-Canada Beyond the Border Action Plan, and the U.S.-Mexico High Level
Regulatory Cooperation Council.

48 See CRS In Focus IF10049, Exchange Rates and Currency Manipulation, by Rebecca M. Nelson, and CRS Report
R44717, International Trade and Finance: Overview and Issues for the 115th Congress, coordinated by Mary A. Irace
and Rebecca M. Nelson.
49 Ibid.
50 USTR, Summary of Objectives for the NAFTA Renegotiation, July 17, 2017, p. 7.
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Trucking
NAFTA provided Mexican commercial trucks full access to four U.S.-border states by 1995 and
full access throughout the United States by 2000. The implementation of NAFTA trucking
provisions was a major trade issue between the United States and Mexico for many years because
the United States delayed its trucking commitments. The two countries cooperated to resolve the
issue over time and engaged in numerous talks regarding safety and operational issues. By 2015,
the trucking issue had finally been resolved.
USMCA generally retains NAFTA trucking provisions. It grants Mexican commercial trucks
authority to operate in the United States, but does not allow trucks to operate between two points
within the country. This means that they can haul cross-border loads but cannot haul loads that
originate and end in the United States. USMCA caps the number of Mexican-domiciled carriers
that can receive U.S. operating authority and continues the prohibition on Mexican-based carriers
hauling freight between two points within the United States. Mexican carriers that already had
authority under NAFTA to operate in the United States continue to be allowed to operate in the
United States.
Anticorruption
The United States has been influential in including commitments to combat corruption in
international trade into its FTAs by incorporating chapters on transparency and anticorruption into
the agreements. Although it has been part of U.S. policy for many years, the use of these types of
provisions has evolved over time with anticorruption commitments becoming progressively
stronger.51 NAFTA did not include a separate chapter related to transparency or anticorruption,
but it did include several provisions that were considered groundbreaking at the time, including
binding rules and disciplines on, and removal of, barriers to foreign investment. It was not until
the proposed TPP that anticorruption provisions were specifically included as a U.S. FTA chapter.
Earlier agreements such as the U.S.-Chile FTA included anticorruption provisions related to
government procurement, but none in the transparency chapter.
USMCA has a new chapter on anticorruption in which the parties affirm their resolve to prevent
and combat bribery and corruption in international trade and investment. The scope of the chapter
is limited to measures to prevent and combat bribery and corruption in regard to any matter
covered by the agreement.
“Sunset” Provision in Review and Term Extension
In USMCA’s Final Provisions chapter USMCA, parties commit to a review of the agreement on
the sixth anniversary of the agreement’s entry into force. If all parties agree to continue the
agreement after six years, it shall remain in force for another 16 years. If a party does not confirm
its wish to extend the term of the agreement for another 16-year period, parties shall conduct a
joint review of the agreement every year. The agreement only specifies that a “party” would
review the agreement; it does not state whether it would be the President or Congress that reviews
the agreement. This may be of interest to Congress as it considers what its role would be in
reviewing the USMCA and in the next authorization of TPA.

51 Transparency International, “Anti-Corruption and Transparency Provisions in Trade Agreements,” Anti-Corruption
Helpdesk, 2017.
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Issues for Congress
Key issues for Congress include how well USMCA is meeting expectations, the enforceability of
USMCA commitments, particularly labor provisions, the role of the Congress and the President in
trade negotiations, and how the agreement may affect broader U.S. relations with Canada and
Mexico.
Congressional Oversight Role
USMCA contains key significant changes from past U.S. FTAs, including digital trade, ISDS,
labor and the environment, rules of origin for motor vehicles and parts, dispute settlement,
government procurement, and the sunset provision to review the agreement after six years. As
implementation of the agreement moves forward, Congress may examine the implications of
these changes more closely. It may examine whether USMCA met the congressional objectives
and requirements under TPA-15 and whether the change in trade policy under USMCA will be
used in future trade negotiations.52 Although numerous policymakers contend that USMCA
contains groundbreaking provisions, others believe that USMCA rolls back some liberalization
commitments, such as the rules of origin in the motor vehicle industry, that it could negatively
affect certain industries and U.S. businesses, and that it should not become a template for future
trade agreements.53
Congress may consider whether to expand its oversight role on implementation of new USMCA
provisions and in enforcement of ongoing trade issues. It may examine whether new provisions
pertaining to labor are raising labor standards as intended. Organized labor in the United States
has long argued that labor enforcement in trade agreements needs to be strengthened in order to
protect U.S. workers, but others argue that domestic policy might be “the most direct, and most
effective, way to improve workers’ lot, especially in advanced countries like the United States.”54
New provisions regarding more restrictive rules of origin (ROO) in the motor vehicle industry
may also be of interest to Congress. USMCA’s auto ROO are likely the most stringent in any U.S.
FTA and the only ones that have a wage requirement.55 The cost of compliance may result in
unintended consequences if manufacturers find it more beneficial to pay duties rather than pay the
additional cost of complying with the new rules. If manufacturers decide to pay tariffs rather than
adhere to the regional value content requirements, it could lead to less North American content
and more content from third countries, including China, in U.S. auto production. Policymakers
may monitor the full effects of these new rules as they are fully implemented. According to a July
2023 report by the U.S. International Trade Commission, the full effect of the ROOs will likely
not be apparent until the agreement is fully implemented in 2027 or later.56

52 For more information on Trade Promotion Authority and the role of Congress in trade policy, see CRS In Focus
IF10038, Trade Promotion Authority (TPA), by Christopher A. Casey and Cathleen D. Cimino-Isaacs, CRS Report
R47679, Congressional and Executive Authority Over Foreign Trade Agreements, by Christopher T. Zirpoli, and CRS
In Focus IF12327, U.S. Trade Policy: Future Direction and Key Economic Debates, by Andres B. Schwarzenberg.
53 See for example, Senator Pat Toomey, “I'll Vote Against This Antitrade Agreement,” Op-Ed, Wall Street Journal,
December 19, 2019.
54 Anne Kim, “The Truth About USMCA’s Labor Provisions, Domestic policy reforms can more effectively help
American workers,” Washington Monthly, December 21, 2019.
55 For more information on rules of origin in motor vehicles, see CRS In Focus IF12082, USMCA: Automotive Rules of
Origin, by Liana Wong and Kyla H. Kitamura.
56 United States International Trade Commission, USMCA Automotive Rules of Origin: Economic Impact and
Operation, 2023 Report, Publication Number 5443, July 2023.
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As noted above, USMCA removed bilateral U.S. government procurement (GP) obligations with
regard to Canada. GP obligations between the United States and Canada continue under the WTO
Government Procurement Agreement (GPA), but if the United States withdraws from the GPA,
the issue of the value of more open government procurement versus Buy American policies may
come to the fore.57 Disagreement over the value and content of ISDS and whether it should be
included in future trade agreements likely will persist, despite the new restrictions in USMCA.
Economic and Broader Considerations
The full effects of the USMCA on North American trade relations are not expected to be
significant because nearly all U.S. trade with Canada and Mexico that meets rules of origin
requirements was already conducted duty- and barrier-free under NAFTA. The USMCA
maintains NAFTA’s tariff and non-tariff barrier eliminations. Many economists and other
observers believe that USMCA is not expected to have a measurable effect on U.S. trade and
investment with Mexico or Canada, jobs, wages, or overall economic growth, and that it would
probably not have a measurable effect on the U.S. trade deficit.58 The U.S. International Trade
Commission (ITC) conducted an investigation into the likely economic impacts of USMCA, a
required element of the TPA process. The ITC study, published in April 2019, stated that the
elements of USMCA that would have the most significant effects on the U.S. economy are those
related to digital trade and the new rules of origin applicable to the automotive sector. USMCA’s
new international data transfer provisions, absent in NAFTA, are expected to positively impact
industries that rely on such data transfers. The new, more restrictive, auto rules of origin may
result in an increase in U.S. production, but also lead to a small increase in prices and a small
decrease in the consumption of vehicles in the United States. Overall, according to the ITC report,
USMCA is expected to have a minimal, but positive effect on the U.S. economy.59
Sixth Anniversary Review of USMCA
Article 34.7 of USMCA states that the agreement shall terminate 16 years after its entry into
force, “unless each party confirms it wishes to continue this Agreement for a new 16-year term,”
in accordance to USMCA procedures.60 These procedures state that in July 2026, the sixth
anniversary of USMCA’s entry into force, the USMCA Free Trade Commission shall meet to
review the agreement and any recommendations submitted by USMCA parties, and decide on any
appropriate actions. Policymakers may monitor the role of Congress in the outcome of the July
2026 meeting, any recommended actions, and the effect of any recommendations on overall
economic and political relations with Canada and Mexico. North America has a highly integrated
manufacturing sector and any changes to USMCA could affect regional competitiveness.

57 Isabelle Icso, “USTR backs U.S. withdrawal from WTO procurement agreement,” World Trade Online, February 26,
2020.
58 John Brinkley, “USMCA is not the Magnificent Trade Deal Trump Says It Is,” Forbes.com, October 8, 2018.
59 United States International Trade Commission, U.S.-Mexico-Canada Trade Agreement: Likely Impact on the U.S.
Economy and on Specific Industry Sectors, Publication Number: 4889, April 2019.
60 USMCA, Article 34.7 of Chapter 34 on Final Provisions.
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Author Information

M. Angeles Villarreal

Specialist in International Trade and Finance

Acknowledgments
A special acknowledgment goes to Ian F. Fergusson, former CRS Specialist in International Trade and
Finance, who provided significant contributions and coauthored the original version of this report.
CRS Research Assistants Angela Molina, Alexa Apodaca, and Rileigh Greutert contributed data collection,
data analysis, graphics, research, and writing to this report. Amber Hope Wilhelm, CRS Visual Information
Specialist, contributed graphics.

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.

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