Canada, Mexico, and the United States have agreed to modernize the quarter of a century-old North American Free Trade Agreement (NAFTA) into a 21st-century agreement. The old NAFTA agreement has now been replaced with the United States Mexico Canada Agreement (USMCA). The USMCA is intended to support mutually beneficial trade among the North American nations, resulting in robust economic growth, fairer trade, and freer markets in the region.
The following are some of the most important eCommerce changes under the new USMCA:
One very important achievement is that The De Minimis Shipment Value has been increased to enhance the effectiveness of cross border eCommerce. The US has renegotiated its trade agreement with Canada and Mexico. The new agreement obligates the two countries to increase their de minimis shipment values to higher values to foster more equitable trade. Mexico has been providing tax-free de minimis shipments up to $50 and duty-free consignments not exceeding $117 and will continue to do so. Canada will provide duty-free shipments on goods with a maximum value of C$150 and will also double its de minimis level from C$20 to C$40. Imports that do not exceed these levels will enter the countries of the USMCA with nominal formal entry complications. This will foster business for medium and small-sized businesses, which will find it easier to participate in cross border eCommerce.
By raising the de minimis rates with Canada and Mexico which are some of its biggest trading partners, the United States has significantly enhanced the business environment for its medium and small-sized businesses. Small and medium-sized enterprises often cannot pay the high taxes and customs duties and typically have to deal with increased costs of compliance given that low de minimis rates restrict lower value consignments the most. Given that such businesses typically have a lot of these low-value shipments, they are the most affected by low, trade-restrictive compliance measures.
New businesses that venture into Canadian and Mexican markets can now benefit from the reduced costs, which will make it easier to access more consumers. Express delivery shippers from the United States who often transport many low-value consignments for such businesses will also improve their businesses from the enhanced efficiency and lower costs.
The De Minimis level of the United States remains $800, with all shipments meeting the threshold imported into the country under Section 321 rules.
To foster commerce there is a need for a high standard of intellectual property protection. The United States, Canada, and Mexico have agreed to put in place a high standard, modernized intellectual property chapter. The new IP chapter is intended to offer effective and strong protection and enforcement of IP rights, which are important for supporting American jobs, creating economic growth, and driving innovation.
- Protections for American creators and innovators.
- Most comprehensive enforcement provisions in the history of trade agreements.
- The highest standards of protection of trade secrets that trump in any other FTA.
American financial service organizations are critical to the American economy as they provide essential services to every segment including medium and small-sized enterprises. In 2016, the US exported approximately $115 billion worth of financial services and generated more than $41 billion in surpluses from transactions in financial services.
The new Financial Services section comes with new pledges to open up the markets in financial services. This will level out the playing field for cross border eCommerce in financial offerings, American financial organizations, and investments in financial organizations. The chapter also made sure to let financial regulators have free rein to make policies that ensure fiscal stability.
Some of the key achievements of the Financial Services enhancements include:
- Better support for financial services
- New provisions that prohibit local data storage regulations
- Obligations to make regulations to prevent discrimination against American organizations providing financial services.
The new USMCA agreement has put in place high standard transparency and policy obligations with strong accountability mechanisms when it comes to currency.
The reworked agreement comes with a chapter on exchange rate matters and macroeconomic policies. Canada, the United States, and Mexico are obligated to adhere to new transparency and policy commitment on currency matters. The chapter also addresses discriminatory currency practices as it obligates the signatories of the agreement to make high-standard commitments to not engage in competitive devaluations. They will also not target exchange rates and while doing this they will provide mechanisms that enhance transparency and accountability. This is a very new approach when it comes to trade agreements and will augment stability in macroeconomics and exchange rates.
One of the American president’s major aims in renegotiating NAFTA was to make sure that American workers got the most from the agreement. Canada, Mexico, and the United States have come up with a chapter on labor that makes labor obligations a core component of the agreement. The agreement also makes the obligations enforceable to the fullest extent, which is more than any other trade agreement ever did.
Some of the key achievements of the labor chapter in USMCA include:
- Representation of workers in collective bargaining
- New labor rules that require 40-45% of automotive content be manufactured by US workers that should earn at least $16 an hour
- Expedited enforcement and monitoring of labor rights at particular facilities
- Signatory countries are to adopt the International Labor Organization’s Labor laws.
Canada, Mexico, and the US have agreed to put in place the most comprehensive, most advanced, and highest-standard section that deals with environmental issues in commerce. Similar to the Labor section in the agreement, environmental policies are core to the contract and are fully enforceable.
The key achievement of the environment section in the new USMCA agreement is the writing of comprehensive enforceable conservational responsibilities. These deal with the trafficking of fish, timber, and wildlife. The policies put in place networks of law enforcement better equipped to fight trafficking and to address critical environmental matters such as marine litter and air quality.
The new Digital Trade chapter comes with strong policy and enforcement regulations on digital trade that trumps any other international agreement. It provides a strong foundation that makes the expansion of investment and trade easier for American companies, given that this is an area where the US has a competitive advantage.