USA, Canada and Mexico begin to live by new rules for trade

A new free trade agreement of Mexico with the United States and Canada USMCA shall come into force on Wednesday. Despite the fact that its initiator and active supporter of US President Donald trump called it a real breakthrough, experts doubt this. The document really covers one of the world's largest free trade area with a turnover of over a trillion dollars.

A new agreement was reached by leaders of the three countries in November 2018 at the G20 summit in Buenos Aires. It replaces the North American free trade area (NAFTA), which at that time was already 25 years old and which from the beginning of his presidency actively criticized trump, believing the conditions are unfair to the United States.

Work started in 2017 and was under pressure from Washington, which threatened to impose duties on goods from Canada and Mexico. USMCA revising the rules of access of participants in the domestic markets of the three countries, rates, and certain labor laws. Most of all it affects the auto industry and working conditions.

In the first case, automakers will be required to produce 75% (13% more) components in one of the three countries taking part agreements. In addition, it contains a requirement that more components should be produced by staff with a salary of at least $ 16 per hour, and workers in these industries should have the right to form trade unions. These measures are intended, on the one hand, to improve labor conditions in Mexico, and on the other to make it less attractive for American car companies from the point of view of the conclusion to their capacity.

In addition, the U.S. will receive greater access to the markets of dairy products of Canada, whose authorities limit foreign imports.

By signing the document, trump said that it will increase to 1.2 percent of GDP, and will lead to job creation. However, according to estimates by the U.S. international trade Commission made before the pandemic coronavirus and the subsequent economic downturn, in those circumstances it would only 176 jobs over six years and GDP growth of 0.35%. The Commission then concluded that the agreement would have a "moderate" positive effect.

About the moderation effect of the policy itself, the American administration and experts say.

In addition, according to him, the policy of the administration on the revision or the commencement of negotiations on bilateral trade agreements has led to the fact that U.S. exporters are able less terms of new markets. In addition, they face higher tariffs and barriers than before. The key markets for US, including Japan and the EU, discussing trade deals with other countries.

"In this sense, the USMCA is still that the attempt to plug the hole in the dam children's finger," believes Meltzer.

He believes that the document is reminiscent of the agreement on Pacific partnership, of which trump got out as soon as he became President. However, the difference is that it gave US more access to markets. All Meltzer believes this is a reflection of Washington's policy in international trade directed more "to protect US from the world than to lead the world".