U.S. Senate approves USMCA trade deal

The U.S. Senate has approved a revamp of the 26-year-old North American Free Trade Agreement that includes tougher labour and automotive content rules but leaves $1.2 trillion in annual U.S.-Mexico-Canada trade flows largely unchanged.

The legislation for the U.S.-Mexico-Canada Agreement passed on an 89-10 bipartisan vote, sending the measure to U.S. President Donald Trump for him to sign into law.

The Motor and Equipment Manufacturers Association (MEMA) released a statement saying it is pleased that the vote was overwhelming and bipartisan.

“We look forward to a quick signing ceremony by President Donald Trump that will close a chapter in this bipartisan success story,” the association stated.

The trade pact, which passed the U.S. House of Representatives on Dec. 19, was first agreed upon in September 2018 and will replace the 1994 North American Free Trade Agreement. Trump vowed for years to quit or renegotiate NAFTA, which he blames for the loss of millions of U.S. factory jobs to low-wage Mexico.

The new agreement modernizes NAFTA, adding language that preserves the U.S. model for internet, digital services and e-commerce development, industries that did not exist when NAFTA was being negotiated in the early 1990s. It eliminates some food safety barriers to U.S. farm products and contains language prohibiting currency manipulation for the first time in a trade agreement.

But the biggest changes require increased North American content in cars and trucks built in the region, to 75 percent from 62.5 percent in NAFTA, with new mandates to use North American steel and aluminum.

In addition, 40 percent to 45 percent of vehicle content must come from high-wage areas paying more than $16 an hour – namely the United States and Canada. Some vehicles assembled in Mexico mainly with components from Mexico and outside the region may not qualify for U.S. tariff-free access.

According to MEMA, which represents more than 1000 member companies in the motor vehicle parts sector, the USMCA will help ensure that motor vehicle suppliers stay competitive in the global marketplace.