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Home » Global Supply Chain Management » Here’s What’s in the New Nafta

Here’s What’s in the New Nafta

There’s a lot to digest in the new trade agreement that the United States, Mexico and Canada finalized in deadline-beating fashion on Sunday, starting with a name change.

October 2, 2018
The New York Times

If the new deal is adopted by all three countries, the North American Free Trade Agreement will give way to the United States-Mexico-Canada Agreement or U.S.M.C.A.

It’s a cosmetic change for an otherwise consequential set of revisions.

“It’s not Nafta redone, it’s a brand-new deal,” President Trump said at the White House on Monday.

Text of the pact, released late Sunday, includes major adjustments in several key areas of the countries’ trading relationships. The agreement sets new rules for automobile production, meant to incentivize production of cars and trucks in countries that pay higher wages. It reduces barriers for American dairy farmers to sell cheese, milk and other products to Canada. It retains a tribunal for resolving trade disputes that the United States had sought to eliminate.

It guarantees Canadian and Mexican manufacturers expanded access to some large American markets, such as cars and light trucks, but leaves lingering questions about their ability to avoid tariffs on steel and aluminum exports to the United States.

Here are highlights from the text of the agreement, and from the 12 “side letters” the negotiating countries filed alongside it.

An attempt to steer more car production to the United States

Nafta required automakers to produce 62.5 percent of a vehicle’s content in North America to qualify for zero tariffs. The new agreement raises that threshold, over time, to 75 percent. That’s meant to force automakers to source fewer parts for an “Assembled in Mexico” (or Canada) car from Germany, Japan, South Korea or China.

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