Analysis: United States-Mexico-Canada Agreement (USMCA)

NAFTA was originally signed in 1992 and eliminated trade barriers between Canada, the United States and Mexico and facilitated the cross-border movement of goods and services. The agreement increased investment opportunities, provided protection of intellectual property rights and created resolution procedures in the case of trade disputes. With the agreement, Canada, the United States and Mexico became the world’s largest free trade area relating to gross domestic product.

Talks between the three countries began in August 2017; the United States and Mexico reached a deal in August 2018, over a month before Canada signed its agreement.

While some have dubbed USMCA as NAFTA 2.0, there were a number of concessions made that will affect Canada under the new deal:

  • The agreement was signed without assurances that current tariffs on steel, aluminum and softwood lumber will be lifted;
  • On steel and aluminum, U.S. Commerce Secretary Wilbur Ross has already said there is “no timeline” for when these tariffs might be lifted and President Trump has said quotas may replace the tariffs;
  • On automotives, Canadian exports for both autos and auto parts are now capped, a provision that didn’t exist before and is one that could pose major problems for manufacturers down the road;
  • On dairy, the Canadian government agreed to provide American dairy farmers access to 3.5 per cent of our domestic dairy market, which has caused anxiety within our dairy industry.

As well, there is a clause in the agreement requiring each member country to give three months’ notice to the other two countries before beginning any trade negotiations with countries considered “non-market” by one of the USMCA partners. This will affect any trade deals Canada pursues with other nations in the future.

Some Canadians may pay more for life-saving drugs under the USMCA. The deal extends the data protection phase for biologic drugs from eight years to 10 years. The biologic drugs, which are made from living organisms, treat a number of life-altering illnesses, including cancer, arthritis and multiple sclerosis. Extending the data protection by two years means American pharmaceutical companies will have a monopoly on the market for a decade and Canadians won’t have access to cheaper generic drugs as early as they once did. This means Canadians who pay for this type of medication out-of-pocket will see higher expenses as a result of the deal.

Copyright legislation will also be affected by the USMCA. The deal extends the term of copyright after an author’s death to 70 years, up from the previous 50 years. This will reduce public access to Canadian content. Changes to the intellectual property rules will likely require the federal government to rewrite legislation, and it will be greatly impacted by the United States’ demands in the USMCA.

Canadian consumers who order online from American retailers will notice a new duty-free threshold after the deal becomes active. Shoppers won’t have to pay duty on U.S. products under $150.

After analyzing the new deal, I believe there are many areas where the government of Canada failed Canadians. There is still a lot of uncertainty regarding steel and aluminum; many in the industry predict a continuing of tariffs on these products could lead to layoffs. In the same vein, caps for vehicle and auto part exports could have an impact for employees of Canadian auto makers. Dairy farmers are also worried about their livelihoods as a result of increased American access into our dairy market. At the end of the day, the negotiating tactic seemed to be to try to hold onto as much as we could versus making any gains for the country.