Paige Keller

6.11.2024

IBUS5511

NAFT Rewrite

1. What concessions did Mexico and Canada need to offer to reach an agreement with

the United States to replace Nafta?

The United States goal was to bring back balance to the economy after feeling harmed from

the original NAFTA agreement between the United State, Mexico, and Canada. Starting

Negotiations with Mexico focusing on the auto motive industry President Donald Trump was

focused on the agenda of Americans and their own economy over the relationship of the

agreement between the countries. This haste makes both Mexico and Canada panic and scramble

to produce proposals to a new deal as NAFTA was responsible for $1 Trillion between the

nation’s economies, and both countries relied on the relationship with the US to keep their local

economies going. (Mackrael, 2018) For Mexico knew that to stay in a deal with the US they had

to give auto production back to the US. A Large part of the deal with Mexico revolved around

their labor. During the time of the policy change, a lot of American Companies were shutting

down their factories and moving them down to Mexico to be more cost effective. With the cheap

labor and the NAFTA agreement US companies could cut costs to keep their products selling at a

lower price, as a result to this a lot of American jobs were lost and many Mexican jobs added.

(Puzzanghera, 2016) For Canada their main concern lied in their protection of their farmers and

dairy industry. To Canada the dairy industry is seen as a cultural industry and is main heartbeat

of the country employing numerous of its citizens. (USMCA Not Possible without Dairy
Concessions | Power & Politics, 2018) The US wanting to bring this manufacturing local and

steer away from importing from Canada and Mexico became an intimidating conversion to be

had.

2. What challenges exist for the USMCA to be ratified and go into effect?

A significant amount of work had to be done for the agreement to be make official and

eradicate NAFTA. The US damaged decade old relationships with ally countries by demanding

changed in a quick turn around based on their personal agenda. Fortunately, in their favor the US

plays a key role in keeping countries’ economies afloat, especially Canada and Mexico that rely

on their export to the US. First the US had to agree to proposals from negotiators from Canada

and Mexico. This is a more difficult process than it sounds as there are many steps that need to

undertake, one proposal needs to be accepted first by the US Trade Commission Officers, then it

goes to Congress, then the Senate and if the proposal is approved that far it can go to the final

sign off of the Presidents approval. With the nature of political party mix in Americas

government at the time this understandably was a lengthy process, as House typically did not

agree on most bills. (Author , 2019) On top of the US having a firm stance on their demand in

the new agreement and lack of time to submit proposals on Canadas behalf a quick and fast

decision was required to make this deal take place.

3. Should Mexico and Canada have offered the concessions that they did to renegotiate

Nafta? Explain your position.

I do agree that the original NAFTA agreement had become outdated, and everything has an

expiration date. Like inflation when an economy changes the value of the dollar needs to reflect

that. This is also how our trade agreements need to be seen. The job market in the US was
compatible with the terms of the agreement back in 1994 when it took into effect. Following the

ideals of the American dream their trade agreements allowed the US economy to grow and move

people out of the manufacturing sector and into the service industry, lending the blue-collar

lifestyles of Canada and Mexico. Disastrously the climate in the US from the 2000 – 2016 was

dreary, with things like 9/11, the Housing crash and Covid-19 many people faced difficult

adjustments in their lives to survive through these times. Making the American dream middle

class slide into poverty, in a country that didn’t supply many jobs as it used to and was

increasingly dropping every day.

The change of the agreement was necessary as the economy today is not the same as it was in

the 90’s. Bringing back labor jobs and manufacturing to the US would definitely see beneficial

change overtime. However, I don’t agree with the mean in which the US government went about

demanding the Change. The relationship between these three counties is very important and

rushing and cutting off benefits from ally countries is seen as a loss to me. I think Canada and

Mexico deserved more time in their negotiations to come to a true fair and balanced agreement

that would support al three economies not just America’s. I think in fear of being left out of the

deal Canada agreed to legging go of to much of their dairy market causing local grocery prices to

go up making Canadians not able to afford Canadian food. For Canadians grocery shopping

across borders they now get heavier more taxed in customs than before, seen in my personal

experience when I go home to Ontario in between school breaks. A majority of Mexico’s exports

from their farming and manufacturing went to the US, without the business their country would

go bankrupt. I believe both countries offered what they did to stay in a relationship with the US

despite the losses they see from the deal, because these smaller losses are not as harmful as not

being in the agreement.

 4. The U.S. goal of increasing local content requirement percentages and adding a

requirement that a certain amount of content has to be performed by high-cost

labor in the automotive industry in USMCA is to bring automotive jobs back to the

United States. Do you think these requirements will achieve this goal? Explain your

point of view.

Yes, I do think this agreement of labor in the Automotive industry will bring specialized

manufacturing jobs back to the United States. Increasing the production requirements from

62.5% of the vehicle to 75% will support more local manufacturers as it requires more internal

labor to product the product. The new concept of labor value content has been introduced in this

agreement, requiring a percentage of the vehicle needs to be made by employees of the countries

includes high-wage manufacturing workers. Lastly the auto industry must satisfy a percentage of

imports of raw materials (steel and aluminum) from the countries included in the agreement.

(USMCA: New Auto Rules, 2020) Allowing more revenue to be staying ‘inside’ the agreement. I

do think that these requirements over time will flourish and give the US the goals they were

trying to achieve, however at a cost. With the increase of high-cost labor in the US this will make

products more expensive because companies will have to compensate for increasing wages,

making things immediately unaffordable for local consumers. Over time I think this could even

out as people need money, they will get jobs, jobs that are now available, and higher paying.

Keeping the middle class employed is what will keep the US economy afloat.
 References

Author. “Rural Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress.”

Cooperative.Com, 25 Nov. 2019, www.cooperative.com/news/Pages/rural-act-why-

popular-bipartisan-legislation-faces-hurdles-in-congress.aspx.

Mackrael, Kim, et al. “In Nafta Rewrite, Canada Took Cue From Mexico: Make a Big

Concession; As Trump’s deadline for the negotiation neared, Canadian negotiators

struggled to make the U.S. give ground.” Wall Street Journal, 29 Nov. 2018, pp. 1–4.

Puzzanghera, Jim. “These Three U.S. Companies Moved Jobs to Mexico. Here’s Why.” Los

Angeles Times, Los Angeles Times, 19 Dec. 2016, www.latimes.com/business/la-fi-

mexico-jobs-20161212-story.html.

“USMCA Not Possible without Dairy Concessions | Power & Politics.” YouTube, YouTube, 5

Oct. 2018, www.youtube.com/watch?v=QrF1Mk4msJk&ab_channel=CBCNews.

“USMCA: New Auto Rules.” YouTube, YouTube, 6 Oct. 2020, www.youtube.com/watch?v=bF-

PTVQFLhA&ab_channel=U.S.CustomsandBorderProtection.