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Nafta & Usmca

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Hemanth Naidu
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20 views16 pages

Nafta & Usmca

Uploaded by

Hemanth Naidu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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NAFTA & USMCA

Presented by
Hemanth Naidu G
OUTLINE
• What is NAFTA
• What happened under NAFTA
• Issues related to NAFTA
• USMCA
NAFTA
• “The single worst trade deal ever approved in this country”
Donald Trump 2016
What exactly NAFTA means?
• North American free trade agreement including US, Canada,
Mexico.
• Negotiated under President George Bush
• Came into effect on Jan 1,1994 under President Bill Clinton
• For the United States and Canada, Mexico was seen both as
a promising market for exports and as a lower-cost
investment location that could enhance the competitiveness
of U.S. and Canadian companies.
• FTA provisions comprised:
• Zero tariffs on imports from each other
• Tariff free only if they “originate” in the NAFTA countries
• “originate” defined how much a good was produced in a
country
• Example: Autos require 62.5% North American content
• Liberalization in services
• Foreign investment
Gives foreign investors rights to dispute policies that reduce
profits
• IPR
• Agreements on labour and environment
EFFECT ON US
• Critics of the deal argue that it was to blame for job losses
and wage stagnation in the United States, driven by low-
wage competition, companies moving production to Mexico
to lower costs, and a widening trade deficit.
• The U.S. auto sector lost some 350,000 jobs since 1994—a
third of the industry—while Mexican auto sector
employment spiked from 120,000 to 550,000 workers.
• But gains of roughly $450,000 for each job lost, in the form
of higher productivity and lower consumer prices.
EFFECT ON MEXICO
• Hundreds of thousands of auto manufacturing jobs have
been created in the country.
• In addition to liberalizing trade, Mexico’s leaders reduced
public debt, introduced a balanced-budget rule, stabilized
inflation, and built up the country’s foreign reserves.
• Mexico was hard hit by the 2008 financial crisis due to its
dependence on exports to the U.S. market—the next year,
Mexican exports to the United States fell 17 percent and its
economy contracted by over 6 percent
EFFECT ON CANADA
• Canada saw strong gains in cross-border investment in the
NAFTA era: Since 1993, U.S. and Mexican investments in
Canada have tripled. U.S. investment, which accounts for
more than half of Canada’s FDI stock grew from $70 billion
in 1993 to more than $368 billion in 2013.
• Agriculture, in particular, saw a boost. Canada is the leading
importer of U.S. agricultural products, and Canadian
agricultural trade with the United States has more than
tripled since 1994, as did Canada’s total agriculture exports
to NAFTA partners.
• At some point Canada’s unemployment rate was reduced
from 11.5(1993) to 7.0 (2015)
THE RENEGOTIATION ERA
• NAFTA laid off hundreds of thousands of employees.
• Renegotiation of NAFTA was one of the hot button for US
presidential race
• Barack Obama back in responded to widespread trade
skepticism among the Democratic base by promising to
renegotiate NAFTA to include tougher labor and
environmental standards.
• In 2019 Donald Trump proposed USMCA in G20 summit
where it was signed by both Mexican President and
Canadian Prime minister.
USMCA
FEATURES
• Auto rules of origin content raised from 62.5 to 75%
• New rules on IPR, environment and labor.
• Revisit deal after 6 years
• Creating a more level playing field for American workers, including
improved rules of origin for automobiles, trucks, other products,
• Preserves and enhances U.S. duty-free access to Mexican and
Canadian markets.
• Increases market access for U.S. farmers with new export
opportunities for U.S. dairy, poultry and egg producers.
• USMCA will be the first U.S. free trade agreement with a
digital trade chapter, creating a strong foundation for the
expansion of trade and investment in innovative digital
products and services.
• Drug manufacturers can no longer enjoy monopolistic
control over biologics
• Higher-wage factory regulations may entail modest
increases to production costs
Thank you

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