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Trudeau meets Trump -

On November 29, 2024, Canadian Prime Minister Justin Trudeau met US President-elect Donald Trump at his Mar-a-Lago luxury estate. The meeting came after Trump threatened sweeping 25% tariffs on goods from Canada and Mexico. Trudeau, seen here leaving his West Palm Beach hotel as he headed to meet Trump, has cited the United States-Mexico-Canada Agreement, or UMSCA, negotiations as a sign he believes he can work with the US president-elect on trade and avoid a trade war.

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What is the USMCA? -

The USMCA is a free trade agreement among the United States, Mexico, and Canada. Drafted in 2018, revised in 2019, and effective since 2020, it was signed by President Trump, Mexican President Enrique Pena Nieto, and Canadian Prime Minister Justin Trudeau. 

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North American Free Trade Agreement -

The USMCA replaced the North American Free Trade Agreement (NAFTA), which was implemented in 1994 and signed off by US President George Bush, his Mexican counterpart Carlos Salinas de Gortari, and the Canadian prime minister, Brian Mulroney.  

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Making better on a bad deal -

President Trump had previously described NAFTA as the "worst trade deal ever made," although the USMCA actually maintains or updates the provisions of its predecessor. 

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Renegotiating the USMCA -

Now however, President-elect Trump is seeking to renegotiate his own trade deal with Mexico and Canada. 

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A balanced trade agreement -

President Trump described the USMCA as "the most modern, up-to-date, and balanced trade agreement in the history of our country," and insisted it offered the most advanced protections for workers ever developed. 

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Room for improvement -

But during an appearance at the Detroit Economic Club on October 10, 2024, Trump revealed that upon taking office in January 2025 he will invoke the six-year renegotiation provision of the USMCA that he put in. 

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Advantages of the USMCA -

Updating NAFTA to create the new USMCA has served as mutually beneficial for North American workers, farmers, ranchers, and businesses. According to the International Trade Administration, it has created a more balanced environment for trade, supported high-paying jobs for Americans, and grown the North American economy. Pictured in 2019 is US Vice President Mike Pence speaking about the USMCA at an Uline distribution center in Pleasant Prairie, Wisconsin. 

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The key components -

Key components of the USMCA include creating a more level playing field for American workers, including improved rules of origin for automobiles, trucks, other products, and disciplines on currency manipulation.

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Tariff free -

The USMCA requires 75% of a vehicle's parts to be made in one of the three countries—up from the previous 62.5% rule. This directive ensures auto goods remain free from tariffs when moving across borders.

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Beneficial to the US agricultural sector -

The agreement also benefits American farmers, ranchers, and agribusinesses by modernizing and strengthening food and agriculture trade in North America.

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Supporting a 21st-century economy -

In a move designed to support a 21st-century economy through new protections for US intellectual property, the trade deal created sweeping new benefits for the technology sector.  

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Digital trade benefits -

The revised USMCA also incorporated new chapters covering digital trade, anti-corruption, and good regulatory practices. It prohibits tariffs on digital products, such as e-books, music, and software. 

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Protecting intellectual property -

These additions also included a modernized, high-standard intellectual property (IP) chapter that provides strong and effective protection and enforcement of IP rights—vital for US innovators and creators. 

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CUSMA -

In Canada, the USMCA is officially known as the Canada–United States–Mexico Agreement (CUSMA) in English and the Accord Canada–États-Unis–Mexique (ACEUM) in French.  

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T-MEC -

In Mexico, the agreement is called Tratado entre México, Estados Unidos y Canadá (T-MEC). Pictured is Claudia Sheinbaum Pardo, who was sworn in as the Mexican president on October 1, 2024. 

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Labor rights -

The USMCA places a strong emphasis on labor rights, specifically in Mexico, where labor conditions historically lagged behind those in the US and Canada.

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Improved employment rights -

As such, the agreement mandates improved protections for workers, including the right to unionize and better workplace safety standards.

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Addressing environmental concerns -

USMCA's environmental provisions are designed to allow each party the discretion to decide how best to allocate its environmental enforcement resources. Obligations include addressing air quality, marine litter, and protecting endangered species. 

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Market forces -

The USMCA offers US farmers greater access to the Canadian dairy market. It allows US dairy producers to export more milk, cheese, and other dairy products north of the border. 

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Driving the automotive sector -

The automotive sector, crucial for all three economies, sees several benefits from the USMCA. For example, the agreement requires a higher percentage of car parts to be manufactured within North America. Furthermore, a portion of these parts must be made by workers earning at least US$16 an hour. 

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Criticism of the USMCA -

However, the $16-an-hour wage requirement applies to only a portion of auto industry workers, and low wages remain prevalent in many industries. The discrepancy surrounding the $16-an-hour wage requirement is just one of the perceived disadvantages of the agreement.

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Disputes over labor law enforcement -

Detractors point out that while the agreement includes strong labor protections, actual enforcement may be inconsistent. This, they say, could lead to industrial dispute. 

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Potential disadvantages for SMEs -

Others have found fault with USMCA's more stringent rules regarding cross-border digital trade, arguing that while large corporations may benefit from streamlined trade and enhanced IP protections, small and medium enterprises may struggle to meet increased regulatory requirements. 

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Environmental provisions don't go far enough -

USMCA's environmental provisions are cause for concern for some environmental advocates who while commending the promotion of environmental responsibility, believe it lacks strong enforcement mechanisms to ensure each country upholds these standards and properly address climate change. 

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Mixed views -

Since its inception, economists have voiced mixed views on the USMCA's long-term benefits. According to US government estimates, the agreement could create up to 176,000 new jobs and add $68 billion to the US economy. 

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Uneven opportunities -

This optimism is countered by the fact that benefits may be unevenly distributed, with larger more robust companies and specific sectors standing to gain more than others.

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A better deal -

Donald Trump thinks there's room for improvement. He plans to renegotiate the USMCA but said he would not undermine the deal already in place. 

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Tariff threat remains -

But Trump's recent meeting with the Canadian s premier took place shortly after the US president-elect threatened sweeping 25% tariffs on goods from Mexico and Canada until both countries stop what he claims is a flow of drugs and illegal immigrants into the United States.

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A "good call" -

For his part, Justin Trudeau said that he had a "good call" with Trump on the phone following the tariff threat, and that he was looking forward to "lots of great conversations" with the next president of the United States. 

Sources: (International Trade Administration) (Government of Canada) (US Customs and Border Protection) (Office of the United States Trade Representative) (Nova Link) (CNN) (ABC7) 

See also: Trump shakes markets with tariff threats on China, Mexico, and Canada.

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