NAFTA: North Atlantic Free Trade Agreement

NAFTA is not an example of integration at

par with either EU, ASEAN or SAARC. It
has been just a free trade agreement. First
free trade agreement between developed
and developing countries. It was proposed
by H. W. Bush, and implemented by
Clinton administration. This shows that
there was bipartisan support for NAFTA in
USA. However, later on there was
resentment against NAFTA. Even Obama
administration wanted to revise it. Trump
administration took aggressive posture, called it as worst trade deal ever.
US has forced NAFTA countries to revise the terms and conditions. The main reason being
US-China rivalry. After USA, Canada is the second largest trading partner of China. China has
huge investments in Mexico and other Latin American countries.
According to Robert D Kaplan, USA has been ignoring the challenge to its hegemony in its
own backyard.

1. Porous border give opportunity to non state actors, to enter in USA.

2. Reduction of tariffs give opportunity to China to enter into US market where Mexico
acts as a back channel route.

USMCA(United States–Mexico–Canada Agreement) vs. NAFTA — What Are the

Differences?
A Brief History of USMCA
On September 30, 2018, following a series of
intensive negotiations, Canada, Mexico, and the U.S.
agreed to create a NAFTA 2.0 — later re-named as
the USMCA.

This new agreement will continue to accommodate mutually beneficial trade between the
three nations while addressing several concerns including job losses and the suppression of
wages in the U.S., worker exploitation in Maquiladoras, the rise of e-commerce, and
intellectual property protection.
The USMCA was largely driven by the Trump administration’s approach to trade and a desire
to return manufacturing, and manufacturing jobs, to U.S. soil.

What Are the Key Differences Between USMCA and NAFTA?

1. Dispute Settlement Provisions
Under the new agreement, Canada will completely withdraw from The Investor-State
Dispute Settlement (ISDS), although the settlement will remain in place in some cases
between the U.S. and Mexico. This means investors from Canada and the U.S. will no longer
have access to investor-state dispute resolution in these countries.

2. Rules of Origin for Automobile

The Trump administration repeatedly raised concerns that NAFTA encouraged the
outsourcing of automobile production, at a detriment to U.S. manufacturing and jobs.

NAFTA required automobiles to have 62.5% of components manufactured in Mexico, the

U.S., or Canada to qualify for zero tariffs. Under the USMCA, this will increase to 75%.

In addition, between 40% and 45% of automobile parts must be manufactured by employees
who earn more than $16 an hour.

3. Intellectual Property
A few additions have been made to address intellectual property and the digital economy.

For example, the USMCA will extend the terms of copyright from 50 to 70 years beyond the
life of the author. Other clauses will protect internet companies to ensure they’re not liable
for the content their users produce and the prohibition of duties on eBooks and music.

4. De Minimis Threshold
The de minimis (duty-free) threshold has been increased from $20 to $150 for imports into
Canada and from $50 to $100 for imports into Mexico. This might adversely impact retailers
in Canada and Mexico, who will be harder hit financially when importing low-value goods.

5. Government Procurement
The USCMA will allow all parties to maintain protocols allowing the preferential treatment of
small and medium-sized enterprises (SMEs). The agreement also recognizes the use of
electronic tendering procedures and protections against corruption and fraud for businesses
partaking in government procurement.

6. Environmental Standards

When a project has the potential to have a detrimental impact on the environment, the
USMCA specifies that an environmental impact assessment must be completed to minimize
or mitigate the effects. In the U.S., compliance with the National Environmental Policy Act
should satisfy this requirement.

7. Canadian Dairy Market

Reforms to Canada’s dairy pricing system will provide U.S. farmers with exclusive access to
the Canadian dairy market. Under USMCA, U.S. dairy exports are predicted to increase by
more than $314 million a year.

8. Certification of Origin
Under the USMCA, participating countries can attain a certification of origin through
informal documentation, including commercial invoices. This will negate the need for
businesses to complete a formal certificate of origin and can be completed by the importer,
exporter, or producer.

9. Sunset Clause
NAFTA did not include an Update Deadline or a Sunset Clause. USMCA’s Sunset Clause will
require the participating parties to revisit and renegotiate their terms — or withdraw from
the agreement entirely — on or before its 16th year post-implementation. This ensures trade
issues are not neglected.