The New North American Free Trade Agreement

The U.S.-Mexico-Canada Agreement could modernize manufacturing and aid the overall economy.

Free Trade OEM Magazine
Free Trade OEM Magazine

In June, Mike Pence, Vice President of the U.S., visited the JLS Automation manufacturing facility in York, Pa., to discuss the U.S.-Mexico-Canada Agreement (USMCA), which promotes fair trade between the three countries.

 

The USMCA is an effort aimed at modernizing the 24-year-old North American Free Trade Agreement (NAFTA), which was originally designed to remove the barriers to the exchange of goods and services between the three countries. USMCA, otherwise known as NAFTA 2.0 here in the U.S., is a renegotiation of that deal, which addresses new issues emerging around digital trade, as well as stricter labor and environmental standards, and intellectual property (IP) protections.

While USMCA was agreed to and signed by leaders of all three countries in November of 2018, only Mexico has ratified the deal to date. Canadian Parliament and the U.S. Congress have yet to pass the agreement. As a result, organizations like the National Association of Manufacturers (NAM) and PMMI, the Association for Packaging and Processing Technologies, continue outreach efforts that encourage manufacturing executives to call on Congress to ratify USMCA.

The goal of USMCA: To strengthen manufacturing in America, in Mexico, and in Canada.

 

According to NAM, as U.S. manufacturers’ most critical partners, Canada and Mexico purchase one-fifth of the total value of U.S. manufacturing output—more than the next 10 trading partners combined. These exports support about 2 million American manufacturing jobs and 43,000 small- and medium-sized businesses.

NAM recently released data sheets that outline how the USMCA will impact each state. For example, the fact sheet states that one in four Pennsylvania manufacturing firms export to North American partners, and more than 80% of them are small and medium-sized businesses—like JLS Automation, which is a maker of robotic case packing systems. Without a free trade agreement, Pennsylvania’s exports to North American partners could face more than $1.5 billion in tariffs.

 

The tariffs concern Craig Souser, CEO of JLS Automation, but he is even more worried that he could lose business if Congress does not pass the USMCA. “We have competition in Canada. We can compete, we’re not worried about that, we just don’t want them to have an unfair advantage,” he says, noting the need for the same rules to be applied at home and abroad. “Just level the playing field and we, at JLS, will take care of the rest.”

 

Nafta 2.0

The foundation of NAFTA, which is a duty-free, quota-free treatment for trade in goods, has created a highly integrated and robust supply chain between the U.S., Canada, and Mexico.

“NAFTA has worked and is working,” says Shawn Jarosz, president and founder of TradeMoves, an international trade and customs advisory firm, noting there is a constituency of people who say, “If it’s not broke, don’t fix it.”

The latest thinking, however, is that NAFTA is an old agreement and some people—especially President Donald Trump—think it’s stagnant. Early on in his administration, Trump railed against NAFTA and called out both Mexico and Canada for taking advantage of the U.S. on trade. On several occasions, the president threatened to pull the U.S. out of NAFTA, using that as leverage to get a more modernized version of the trade agreement passed.

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