Since NAFTA went into effect on January 1, 1994, trade restrictions were reduced, and the free market was broadened for North America. It eliminated trade barriers and helped to protect intellectual property rights. This agreement made North America the largest free trade market in the world. Now, 26 years later, Congress approved the new United States Mexico and Canada Agreement (USMCA), and President Trump signed it on January 29th, to update the former trade agreement and bring it into the 21st century.
According to the Office of the United States Trade Representative, President Trump said, “USMCA is a great deal for all three countries, solves many deficiencies and mistakes in NAFTA, greatly opens markets to our farmers and manufacturers, reduces trade barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world.” The agreement is intended to upgrade key policies such as intellectual property, digital trade, financial services, environment, and other minor areas. It is expected to increase agricultural exports by $2 billion, providing a boost for American farmers.
The Iowa Farm Bureau Spokesman wrote that Senator Charles Grassley played a key role in pushing the legislature and kept in on the President’s front burner to get it passed. Grassley stated to the Spokesman, “The updated agreement opens up new market access for thousands of new jobs and a new playing field for US farmers and manufacturers.” This deal is significantly important for diary producers as Mexico and Canada make up about 40% of total dairy exports, benefiting them by $242 million.
Despite the positive outcomes for business owners and farmers, some American economists are skeptical of the new trade deal. Veronique de Rugy with the Mercatus Center at George Mason University opposes some components of the USMCA. Last December she wrote she approves of the idea that the agreement would reduce the 270% tariffs on dairy exports, but she has concerns that the USMCA would raise cost on production and weaken the North American Supply chain. She said when NAFTA went into effect, trade had an overall increase, creating an “intricate North American supply chain. Other countries around the world shifted their production from their own country to North America, strengthening the economy. She believes the agreement will have long-term consequence that will negatively affect foreign trade.
Though the United States and Mexico have already signed, Canada has yet to approve the USMCA, and if it passes, it would go into effect 90 days after the final party approves it.