USMCA vs. NAFTA

Before getting into the difference between USMCA (U.S.-Mexico-Canada Agreement) and NAFTA, let’s look at their trade data to understand potential impact of the deal.

U.S. Trade with Mexico in 2017 (in goods, in billions)

  • Exports $243 (Top 4: machinery $43, electrical machinery $41, mineral fuels $27, vehicles $21)
  • Exports on Agricultural $19 (Top 4: corn $2.7, soybeans $1.6, pork $1.5, dairy $1.4)
  • Imports $314 (Top 4: vehicles $84, electrical machinery $62, optical and medical $14, mineral mineral $11)
  • Imports on Agricultural $25 (Top 4: fresh fruit $6, fresh vegetables $5.5, wine and beer $3.3, snack food $2.1)
  • Balance -$71
  • Investment in Mexico $110
  • Investment from Mexico $18

source: Office of the U.S. Trade Representative

U.S. Trade with Canada in 2017 (in goods, in billions)

  • Exports $282 (Top 4: vehicles $52, machinery $43, electrical machinery $25, mineral fuels $20)
  • Exports on Agricultural $24 (Top 4: prepared food $1.9, fresh vegetables $1.9, fresh fruit $1.6, snack foods $1.4)
  • Imports $299 (Top 4: mineral fuels $73, vehicles $56, machinery $21, special other $14)
  • Imports on Agricultural $22 (Top 4: snack foods $4.2, red meats $2.3, other vegetable oils  $2, processed fruit & vegetables $1.5)
  • Balance -$25
  • Investment in Canada $391
  • Investment from Canada $451

source: Office of the U.S. Trade Representative

Top 10 U.S. Dairy Export Markets in 2017 (in millions)

  1. Mexico $1,312
  2. Southeast Asia $690
  3. Canada $636
  4. China $577
  5. Japan $291
  6. South America $288
  7. South Korea #280
  8. Oceania $258
  9. Middle East/North Africa $234
  10. Caribbean $221

source: U.S. Dairy Export Council

Top 10 Dairy Products Exports by State (in millions)

  1. California $825
  2. Wisconsin $682
  3. New York $340
  4. Idaho $320
  5. Pennsylvania $251
  6. Texas $251
  7. Michigan $223
  8. Minnesota  $219
  9. New Mexico $163
  10. Washington $149

source: U.S. Department of Agriculture

Now let’s look at the difference between USMCA(“U”) and NAFUTA(“N”) in the following categories.

CARS

  • U: 0% tariffs if 75% of their vehicles’ components are manufactured in the U.S., Canada or Mexico.
  • U: 40-45% of vehicle production must be done by workers earning at least $16/hour. (current wage: Mexico parts wage $3.41, Mexico assembly wage $7.34, U.S. and Canada $20)
  • U: 70% of the steel and aluminum used in vehicles will have to come from the U.S., Canada or Mexico.
  • U: If the U.S. imposes new auto tariffs, Mexico and Canada would be able to export up to 2.6 million passenger vehicles to the U.S. annually without any tariffs. Exports above that amount could be subject to tariffs (25%?).
  • N: 0% tariffs if 62.5% of their vehicles’ components are manufactured in the U.S., Canada or Mexico

DAIRY

  • U: Canada allows American farmers to export about $560 million (3.5% of the dairy market in Canada) .
  • U: U.S. allows Canadian dairy, peanuts and peanut products, and a limited amount of sugar.
  • U: Canada eliminates Class 7 milk, which made it cheaper to buy certain high-protein milk products domestically.
  • N: N/A

DRUG

  • U: Protections for biologics, certain types of drugs for 10 years
  • N: protections for biologics, certain types of drugs for 8 years

DIGITAL

  • U: 0% tariffs on computer software, text, video, image, sound recording or other digital product.
  • U: Law enforcement officials can stop suspected counterfeit or pirated goods.
  • U: Punishments for pirated movies online and civil/criminal penalties for satellite/cable signal theft.
  • N: N/A

DISPUTES

  • U: Chapter 19 and 20 both survived. Restricts chapter 11 between the U.S. and Mexico, while eliminating it between the U.S. and Canada.
  • N: Chapter 11 – solving disputes between companies and governments. Chapter 19 – cross-border mediation when clashing over dumping or subsidy cases. Chapter 20 – disputes between states.

UNION

  • U: Mexico must make it easier for workers to form unions
  • N: N/A

SUNSET CLAUSE

  • U: 2020 – 2030 or 2052
  • N: 1994 – no ends

STEEL & ALUMINUM TARIFF

  • U: No change at this moment – Steel 25%, Aluminum 10%
  • N: N/A

source: Office of the U.S. Trade Representative
source: Center for Automotive Research

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