Dec 17, 2019

Bernstein, Eatedali Analyze Impact on Industries from USMCA Deal

On Dec. 10, the U.S., Mexico and Canada announced a compromise to the U.S. Mexico and Canada Agreement (USMCA), sending it on the path to ratification in all three countries.

In a Dec. 16 article for Global Trade magazine, McGuireWoods Consulting senior vice president, Ryan Bernstein, and research associate, Mariam Eatedali, analyzed how the new trade deal will impact various industries, including labor, pharmaceuticals, steel and auto, and reviewed its updated environmental standards.

One of the biggest changes in the USMCA compromise is the creation of an interagency committee that will monitor Mexico’s labor reform, including monitoring and penalties for noncompliance. In addition, language was removed that made it difficult to prove that trading partners were not protecting workers from violence, and both the U.S. and Mexico have the ability to investigate factories in the respective countries.

Environmental standards were also included in the trade agreement, including protections for endangered species, regulation of whaling, prevention of pollution from ships and protection of the ozone layer. For the pharmaceutical industry, Democrats argued against an exclusivity period for biologics, and this language was removed along with patent evergreening.

Technology companies maintained legal protections, but the revised agreement has strict rules of origin for the automotive industry. In addition, in order to avoid tariffs, a car or truck must have 75 percent of its components made in the U.S., Mexico or Canada, with workers earning at least $16 an hour for 30 percent of the total work completed on cars.

“With the United States positioning itself to negotiate several more trade deals, labor hopes that these last-minute changes set a benchmark for labor standards and enforcement moving forward and, likewise, the President hopes it demonstrates he can close a major trade deal,” the authors said.