The New United States–Mexico Trade Agreement

Recently, Mexico and the United States have reached a new agreement that will supersede the North American Free Trade Agreement that has been in place for more than two decades.  The new bi-lateral United States–Mexico Free Trade Agreement will hopefully include Canada in the coming days.

This blog- will consider what the new United States–Mexico Trade Agreement implies.  Relevant matters dealt with in the new accord deal with:

The rules of origin for the North American automotive industry.  Main points included in the agreement are:

• That 75% of the content of cars that the United States imports from Mexico should be made up of Mexican and US content. The figure that was enforced in the NAFTA was 62.5%.  This chance will oblige North American auto manufacturers to source more auto parts and assemblies in the region;
• That 40%-45% of the value of automobiles imported into the US under the new United States-Mexico Trade Agreement should come from places in which workers are paid at least US $16 per hour.

The new United States–Mexico Trade Agreement also includes a new chapter on digital commerce.  Of importance in this section of the accord is:

• That the agreement ensures that there are no import duties charged on products that are distributed via digital platforms. Among the items included under this provision are e-books, videos, music, software, and games;
• That the United States–Mexico Trade Agreement eliminates restrictions on the use of digital signatures in order to facilitate online transactions;
• That there are consumer protection mechanisms put in place that apply to the digital market.

The United-States–Mexico Trade Agreement strengthens intellectual property protection and includes:

• A provision that permits legal authorities to confiscate products that have been pirated. Such items can be confiscated at any trade port of entry and departure;
• A battery of civil sanctions that apply to the pirating of digital or cable signals and emissions;
• Added protection against the theft of commercial trade secrets;
• The strengthening of patent rules and regulations;
• An extension of the copyright (authorship rights) for a period of seventy-five years for artistic works.

The new United States-Mexico Trade Agreement addresses provisions in the area of labor.  These include:

• Mexico’s recognition of the right of workers to bargain collectively;
• A requirement that both parties to the agreement adopt and maintain workers’ rights;
• The prohibition of the importation of goods produced with forced labor;
• A guarantee that migrant workers are protected by labor law.

Environments issues are also an integral part of the United States-Mexico Free Trade Agreement.  In this area:

• There is a provision that no subsidies be provided to unregulated fishing activities;
• Parties to the agreement protect species such as whales and sea turtles;
• Officials must create mechanisms by which the public can give input as regards environmental issues in the two countries that are a party to the agreement.

The new United States-Mexico Trade Agreement will be in effect for an initial period of sixteen years with an option to renew for sixteen more years.  There will be an annual revision of the accord after six years.

The agreement did not address US tariffs placed on Mexican steel and aluminum.  For the time being, these taxes on trade continue to exist.