Articles On North American Free Trade Agreement

In late 2019, the Trump administration won Democratic support in Congress at the USMCA after agreeing to incorporate greater labor law enforcement. In the updated Pact, the parties agreed on a number of changes: the rules of origin for the automotive industry were strengthened, so that 75% of each vehicle must come from the Member States, compared to 62.5%; And new work rules have been added, which require that 40 percent of each vehicle come from factories that pay at least $16 an hour. A proposal to extend intellectual property protection for US pharmaceuticals – a red line for US negotiators – has been sacrificed. The USMCA also significantly reduces the controversial investor-state dispute settlement mechanism, eliminates it completely with Canada, and limits it to certain sectors with Mexico, including oil and gas and telecommunications. Many analysts explain these divergent results by the « two-speed » nature of the Mexican economy, in which NAFTA has exhausted the growth of foreign investment, high-tech production and rising wages in the industrial north, while the largely agricultural South has remained disconnected from this new economy. Economist Mauro Guillen of the University of Pennsylvania argued that Mexico`s growing inequality is due to the fact that NAFTA-oriented workers in the North receive much higher wages from trade-related activities. When NAFTA negotiations began in 1991, the goal of the three countries was to integrate Mexico into the developed high-wage economies of the United States and Canada. The hope was that freer trade would bring Mexico stronger and more stable economic growth, creating new jobs and opportunities for its growing workforce and discouraging illegal immigration. For the U.S. and Canada, Mexico was seen as both a promising export market and a cheaper investment site that could improve the competitiveness of U.S.

and Canadian companies. Moreover, many economists argue that recent problems with U.S. production have little to do with NAFTA and argue that domestic production was stressed decades before the contract. A study published in 2016 by David Auteur, David Dorn and Gordon Hanson [PDF] showed that competition with China had a much greater negative impact on the United States.