President Trump signed the United States-Mexico-Canada Agreement into law January 29th. “The USMCA is the largest, most significant, modern, and balanced trade agreement in history. All of our countries will benefit greatly,” said the President at the signing ceremony.
The new deal, which includes new labor rules, rules of origin, and digital trade regulations among other NAFTA updates, is being hailed by manufacturing companies and groups in the United States as a victory. Jay Timmons, President of the National Association of Manufacturers, thanked the President and leaders in Congress “for their herculean efforts to deliver this win for manufacturers of all sizes—from small family businesses to iconic global brands.”
Metalworkers
CEO of the American Iron and Steel Institute Thomas Gibson attended the signing, and said that the deal “promotes increased cooperation and information sharing among the North American government to address circumvention and evasion of trade remedy orders.” Significantly for metalworkers, the USMCA requires that 70% of the steel and aluminum in vehicles must be made by member states.
“This will enhance the ability of our three countries to continue to work together to address the surges of dumped and subsidized steel imports that have plagued the North American steel market,” said Gibson, who also mentioned that 90% of exports coming out of American steel mills go to either Canada or Mexico.
U.S. Steel CEO David B. Burritt also endorsed the deal as an “example of elected leaders from both parties working together in an effort to support American jobs, industry, and the economy.”
Equipment Manufacturers
In a statement, the Association for Equipment Manufacturers called the deal a “victory for equipment manufacturers.” President of AEM Dennis Slater said “The agreement restores certainty to the North American market and secures duty-free access to our industry’s two largest export markets. It will help equipment manufacturers grow in the United States, compete globally, and support millions of family-sustaining jobs across the country.”
Executives represented by the AEM praised the deal as well, including those from Caterpillar Inc., Komatsu America, Blount International, Volvo Construction Equipment, AGCO, and the Vermeer Corporation. Rod Schrader, CEO of Komatsu America, said “USMCA will allow American manufacturers to establish more predictable trade relations and helps ensure fair trade for our products with our important trading partners, Canada and Mexico.”
Bill Long, the CEO of the Motor & Equipment Manufacturers Association, also attended the signing ceremony. In a statement, he said the deal “begins to establish economic certainty, which is essential to preserving and enhancing vital North American supply chains for the U.S. motor vehicle sector.”
Automotive Workers
The UAW’s statement on the USMCA was more guarded than most: “UAW members know far too well that trade agreements have not delivered the job security protections promised.” The auto union noted that the new trade agreement “will not bring back the hundreds of thousands of good U.S. manufacturing jobs that have already been shipped to Mexico.” They pledged to be “vigilant” in ensuring that the USMCA’s labor regulations would be enforced: “We will be watching.”
The USMCA does contain a number of regulations designed to level the playing field between workers in the United States and Mexico: the agreement requires that 40 to 45% of car parts must come from factories paying their workers at least $16 an hour. Broadly speaking, that means automakers must make their cars in America, raise wages for their Mexican workers so that they’re closer to American wages, or face heavy tariffs. And in May of last year, while the USMCA was still being negotiated, Mexico passed a labor-reform measure intended to increase the transparency of local labor unions.
Additionally, under NAFTA, vehicles with 62.5% of its parts made in a North American country could avoid all tariffs: Under the USMCA, that bar will rise to 75%, encouraging North American companies to source their parts from nearby instead of from Germany or China. The alternative is a heavy tariff.
Looking Ahead
The USMCA won’t go into effect right away: It still has to be ratified by the Canadian Parliament, which introduced the necessary legislation on Dec. 31. The original version of the deal was signed by leaders from all three countries in September 2018.
