Last weekend, the U.S., Canada, and Mexico reviewed and negotiated on NAFTA and made several changes that can be very lucrative for Americans, but not as much for Canadians and Mexicans. While talking about the effects of this new version of NAFTA, let’s look at the changes being made:
With the new deal, in order to qualify for zero tariffs, cars and trucks need to have 75% of their components manufactured in Canada, U.S, and Mexico. Compared to the original document, NAFTA, it is a major increase from 62.5%. The goal is to boost auto parts manufacturing in North America by forcing auto industries to use parts made here versus cheaper parts from other countries. This will probably increase the cost of cars and trucks and might make it harder for Mexico to make or sell certain
smaller cars here in the United States.
Talks of Labor
We are going to see a significant change in Mexico’s wages! The new agreement calls for 40 to 45% of automobiles to be made by workers who earn at least $16 an hour by 2023. This provision specifically targets Mexico and is meant to bring wages there up to US and Canadian standards. By looking at this major change in wages for Mexican workers, it looks like two things are happening that Trump is trying to do:
– Keep auto industries in North America
– Lower immigration rates from Mexico
If wages increase in Mexico, that will take care of one of the few reasons for Mexicans to cross the border. Of course, I am not saying that there aren’t other factors for people coming to the U.S., but it should solve part of it, which I believe to be great for Mexican citizens. I see the this revised deal as beneficial to my uncle who lives in Mexico, who will now be able to make a stable financial situation with his newborn.
U.S. Farmers vs Canadian Farmers. Who gets the benefit?
The NAFTA deal allowed Canadian farmers to benefit more from dairy products in America than American farmers benefiting from them. With this revision, the U.S. has completely flipped the switch and Canadians are not happy.
Canada uses what’s called a supply management system for dairy, which closely regulates how much of each product can be produced and puts strict tariffs and fixed numbers on those items when they’re shipped into the country. The U.S. got Canada to open up its dairy market, starting with a six-month phase-in of access that goes up
to about 3.6 percent — an amount just slightly above that which was negotiated in the Trans-Pacific Partnership (TPP), a multinational trade deal that Trump pulled the United States out of after taking office.
Although this revision of NAFTA has been discussed, nothing will go into effect until 2020, that’s if Congress gets around to reading it in 2019. This agreement could be good and it could be bad. There are many variables to look at when seeing the demographics of all three countries and how governments are ran. We have a president that cares a lot about business and is very much helping out businesses. No doubt, this agreement will help many workers who are in the automobile and agricultural industry.