The United States-Mexico-Canada Agreement (USMCA) of 2018, the North American Free Trade Agreement (NAFTA) Text, and the Trans-Pacific Partnership (TPP) Text Side-by-Side

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The United States-Mexico-Canada Agreement (USMCA) is a trilateral trade agreement between the United States and its two bordering neighbors, Canada and Mexico.  The three countries announced the new free trade agreement (FTA) on September 30, 2018.  If formalized by all three countries, the USMCA would replace the North American Free Trade Agreement (NAFTA), which has been in force since January 1, 1994. 

Trade and investment among the three countries has expanded significantly since NAFTA entered into force, although the overall trade deficit in goods has increased significantly for the United States with both Mexico and Canada, although the balance with Canada has been more volatile due to variations in U.S. energy imports.  

(Click image to enlarge) United States Trade with Canada and Mexico - Figures from USITC Trade Dataweb

With the rapid change in technology since NAFTA entered into force, expanding issues of interest to business, labor and other stakeholders, and various concerns about how NAFTA has worked, many U.S. stakeholders had an interest in pursuing a review/rewrite/update of NAFTA.  This was also stated as a key objective of the Trump Administration.  The three signatory countries agreed to renegotiate/update NAFTA and began meeting in mid-August 2017.  

The USMCA differs from the NAFTA in various respects.  The  agreement adds chapters on a number of topics not covered in the NAFTA talks (e.g., e-commerce) and updates other chapters (e.g., intellectual property).  There are some changes to market access commitments, though duty-free treatment continues for the vast majority of goods.  The new agreement imposes higher content requirements on motor vehicles to qualify for USMCA origin for duty purposes, requires a certain portion of the product to be produced by labor earning $16/hour.  Labor and environment provisions have graduated up to chapter status from side letters during NAFTA.  Investor-state dispute settlement will be eliminated for US-Canada and reduced for US-Mexico.  Some of the notable provisions, changes and modifications introduced in the USMCA include:

Rules of Origin for Autos/Trucks:  There are new auto standards.  The agreement raises the percentage of a vehicle’s content that must be built within North America from 62.5% to 75% in order to qualify for duty-free status.  Starting in 2020 cars and trucks must have 75% of their components manufactured in Canada, Mexico, or the U.S.  In addition, 70% of steel and aluminum used in the vehicles will have to come from the three nations.  Additionally, at least 30% of a vehicle’s content must be built in facilities where workers earn at least $16 per hour, increasing to 40-45% in 2023. 

Rules of Origin for other products:  The agreement makes changes to certain product-specific rules of origin, such as for chemicals, steel-intensive products, glass, and optical fiber. 

Dairy:  Canada is keeping much of its complex milk and dairy system in place, but it is giving a greater market share to U.S. dairy farmers.  However, this increased market access is limited in scope.  There will be quantity limits before full Canadian tariff rates become applicable.  Pursuant to the agreement, Canada will ease restrictions on its dairy market and allow U.S. farmers to export about $560 million worth of dairy products, about 3.6% of Canada’s total $16 billion dairy industry and an increase from the current level of about 1%.  Canada will also eliminate its “Class 7” category (which includes milk powder and milk protein) and pricing system.  In exchange for Canada’s dairy market access concessions, the agreement will keep in place protection of Canada’s cultural industries and maintain the existing binational panel dispute settlement system for antidumping and countervailing duty cases.  The agreement also phases out the controversial NAFTA Chapter 11, which allows investors to sue governments (further discussed below). 

Other Agricultural Goods:  Canada will grant the U.S. additional access to its chicken, turkey, and egg markets. 

Market Access:  The agreement maintains duty-free status for originating goods, and adds new provisions for transparency in import licensing and export licensing procedures.  It provides for duty-free temporary admission of shipping containers or other substantial holders used in the shipment of goods for 90 days. 

Intellectual Property (IP):  The agreement sets the period of copyright protection for a work, performance or phonogram to 70 years after the author’s death, an increase from Canada’s current 50 year period.  It also provides 10 years of data protection for biologic drugs, an increase from Canada’s current 8 year protection. 

Investment:  The investor-state dispute settlement (ISDS) system will be phased out for the U.S. and Canada over three years, but will remain for certain industries with respect to Mexico, namely: oil and gas, power generation services, telecommunication and transportation services, and management of ownership of infrastructure.  

E-Commerce:  NAFTA pre-dated the rise of digital trade and did not address it.  The new trade pact includes new provisions for e-commerce.  The digital trade chapter prohibits customs duties, fees, or other charges in connection with the importation or exportation of digital products transmitted electronically between persons in any of the parties.  Additionally, parties may not prohibit or restrict the cross-border transfer of information if for business and may not require that computing facilities be used or located in their territory as a condition for conducting business.  

Sunset/Review Process:  NAFTA does not have either a sunset/review process or an expiration date.  In contrast, the USMCA stipulates that the agreement will terminate after 16 years, with a built-in review process after 6 years.  If, after review, all parties agree, the agreement will be extended for another 16-year period, with a review after 6 years. 

Binational panel review of antidumping and countervailing duty final determinations:  Despite opposition by various US industries, the agreement will keep in place the existing binational panel dispute settlement system for antidumping and countervailing duty cases. 

As a potential aid to those interested in the text of the new US-Mexico-Canada Agreement and how that text compares to the texts of the NAFTA and the TPP (text from when US was a signatory), the following table presents the text of each of these agreements, matching similar subjects as closely as possible and following the USMCA’s organization as a guide.  Links to official postings of the unadjusted texts of the USMCA, NAFTA, and TPP are provided, as well as links to a previous side-by-side comparison prepared by our firm of the original NAFTA text and the TPP agreement as originally signed.  Where there is no corresponding text in either of the other two agreements, the USMCA’s text is posted alone. 

The side-by-sides posted below reflect the final text of the agreement, as released on November 30, 2018. 

United States-Mexico-Canada Agreement (Links to USTR full text in PDF)NAFTA Chapters and Side Agreements (Links to NAFTA Secretariat and other outside sources) TPP Chapters (Links to USTR full text in PDF) Side-by-Side Comparisons
Preamble  (Official) Preamble (Official) Preamble (Official) Available Updated
1.  Initial Provisions and General Definitions  (Official) 1. Objectives (Official)
2. General Definitions (Official)
1. Initial Provisions and General Definitions (Official) Available Updated
2.  National Treatment and Market Access for Goods  (Official) 3. National Treatment and Market Access for Goods (Official) 2. National Treatment and Market Access (Official) Available Updated
    US Tariff Schedule (Official)      
        US Tariff Schedule Appendix 1 (Official)      
    MX Tariff Schedule (Official)      
        MX Tariff Schedule Appendix 1 (Official)      
    CA Tariff Schedule (Official)      
         CA Tariff Schedule Appendix 1 (Official)      
3.  Agriculture  (Official) 7. Agriculture and Sanitary and Phytosanitary Measures (Official) No equivalent Available Updated
4.  Rules of Origin  (Official) 4. Rules of Origin (Official) 3. Rules of Origin and Origin Procedures (Official) Available Updated
5.  Origin Procedures  (Official)   Available Updated
6.  Textile and Apparel Goods (Official) Annex 300-B. Textile and Apparel Goods (Official) 4. Textile and Apparel Goods (Official) Available Updated
7. Customs Administration and Trade Facilitation  (Official) 5. Customs Procedures (Official) 5. Customs Administration and Trade Facilitation (Official) Available Updated
8.  Recognition of the United Mexican States' Direct, Inalienable, and Imprescriptible Ownership of Hydrocarbons  (Official) No equivalent No equivalent Available Updated
9.  Sanitary and Phyto-sanitary Measures  (Official) 7. Agriculture and Sanitary and Phytosanitary Measures (Official) 7. Sanitary and Phytosanitary Measures (Official) Available Updated
10.  Trade Remedies  (Official) 8. Emergency Action: Safeguards (Official)
19. Review and Dispute Settlement in Antidumping/ Countervailing Duty Matters (Official)
6. Trade Remedies (Official) Available Updated
11. Technical Barriers to Trade  (Official) 9. Standards-Related Measures (Official) 8. Technical Barriers to Trade (Official) Available Updated
12.  Sectoral Annexes  (Official) No equivalent No equivalent Available Updated
13.  Government Procurement  (Official) 10. Government Procurement (Official) 15. Government Procurement (Official) Available Updated
14.  Investment  (Official) 11. Investment (Official) 9. Investment (Official) Available Updated
15.  Cross-Border Trade in Services  (Official) 12. Cross-Border Trade in Services (Official) 10. Cross Border Trade in Services (Official) Available Updated
16.  Temporary Entry for Business Persons  (Official) 16. Temporary Entry of Business Persons (Official) 12. Temporary Entry for Business Persons (Official) Available Updated
17.  Financial Services  (Official) 14. Financial Services (Official) 11. Financial Services (Official) Available Updated
18.  Telecommunications  (Official) 13. Telecommunications (Official) 13. Telecommunications (Official) Available Updated
19.  Digital Trade  (Official) No Equivalent 14. Electronic Commerce (Official) Available Updated
20.  Intellectual Property  (Official) 17. Intellectual Property (Official) 18. Intellectual Property (Official) Available Updated
21.  Competition Policy  (Official) 15. Competition Policy, Monopolies and State Enterprises (Official) 16. Competition (Official)
Available Updated
22.  State-Owned Enterprises and Designated Monopolies  (Official) 17. State-Owned Enterprises (Official) Available Updated
23.  Labor  (Official)Side agreement on: North American Agreement on Labor Cooperation (NAALC) (Official) 19. Labor (Official) Available Updated
24.  Environment  (Official)Side agreement on: North American Agreement on Environmental Cooperation (NAAEC) (Official) 20. Environment (Official) Available Updated
25.  Small and Medium-Sized Enterprises  (Official) No Equivalent 24. Small and Medium-Sized Enterprises (Official) Available Updated
26.  Competitiveness  (Official) No Equivalent 22. Competitiveness and Business Facilitation (Official) Available Updated
27.  Anticorruption  (Official) No Equivalent 26. Transparency and Anti-Corruption (Official) Available Updated
28.  Good Regulatory Practices  (Official) No Equivalent 25. Regulatory Coherence (Official) Available Updated
29.  Publication and Administration  (Official) 18. Publication, Notification and Administration of Laws (Official) 26. Transparency and Anti-Corruption (Official) Available Updated
30.  Administrative and Institutional Provisions  (Official) 20. Institutional Arrangements and Dispute Settlement Procedures (Official) 27. Administration and Institutional Provisions (Official)
Available Updated
31.  Dispute Settlement  (Official) 28. Dispute Settlement (Official) Available Updated
32.  Exceptions and General Provisions  (Official) 21. Exceptions (Official) 29. Exceptions (Official) Available Updated
33.  Macroeconomic Policies and Exchange Rate Matters  (Official) No equivalent No equivalent Available Updated
34.  Final Provisions  (Official) 22. Final Provisions (Official) 30. Final Provisions (Official) Available Updated
No equivalent 6. Energy and Basic Petrochemicals (Official) No equivalent  
No equivalent No equivalent 21. Cooperation and Capacity Building (Official)  
No equivalent No equivalent 23. Development (Official)  
Annex I - Investment and Services Non-Conforming Measures (Explanatory Note, Mexico, United States, Canada) Annex I. Reservations for Existing Measures and Liberalization Commitments (Official) Annex I. Non-Conforming Measures (Official) Available Updated
Annex II - Investment and Services Non-Conforming Measures (Explanatory Note, Mexico, United States, Canada) Annex II. Reservations for Future Measures (Official)
Annex IV. Exceptions from Most-Favored-Nation Treatment (Official)
Annex II. Non-Conforming Measures (Official) Available Updated
Annex III - Financial Services Non-Conforming Measures (Explanatory Note, Mexico, United States, Canada) Annex VII. Reservations, Specific Commitments and Other Items (Official) Annex III. Financial Services (Official) Available Updated
Annex IV - Non-Conforming Activities [State-Owned Enterprises and Designated Monopolies] (Official) No Equivalent Annex IV: State-Owned Enterprises (Official) Available Updated
No equivalent Annex III. Activities Reserved to the State (Official) No Equivalent  
No equivalent Annex V. Quantitative Restrictions (Official) No Equivalent  
No Equivalent Annex VI. Miscellaneous Commitments (Official) No Equivalent  
Side Letters
1. MX-US Side Letter on 232 Dispute Settlement (Official) No Equivalent No Equivalent
2. MX-US Side Letter on 232 Process (Official) No Equivalent No Equivalent
3. MX-US Side Letter on 232 (Official) No Equivalent No Equivalent
4. MX-US Side Letter on Auto Safety Standards (Official) No Equivalent No Equivalent
5. MX-US Side Letter on Biologics (Official) No Equivalent No Equivalent
6. MX-US Side Letter on Cheeses (Official) No Equivalent No Equivalent
7. MX-US Side Letter on Distilled Spirits (Official) No Equivalent No Equivalent
8. MX-US Side Letter on Prior Users (Official) No Equivalent No Equivalent
9. CA-US Side Letter on 232 Process (Official) No Equivalent No Equivalent
10. CA-US Side Letter on Wine (Official) No Equivalent No Equivalent
11. CA-US Side Letter on Natural Water Resources (Official) No Equivalent No Equivalent
12. CA-US Side Letter on Energy (Official) No Equivalent No Equivalent
13. CA-US Side Letter on Research and Development Expenditures (Official) No Equivalent No Equivalent
14. Side Letter Text on 232 CA-US Response (Official)      
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