After multiple rounds of negotiations, on November 30 2018, the US, Mexico and Canada signed the USMCA at the G20 summit in Argentina.
The USMCA, which still needs to be ratified by their corresponding governments, will replace the 24-year old North American Free Trade Agreement (NAFTA), and will come into force three months after the last member party completes its internal approval process.
The new agreement is comprised of 34 chapters (relative to the 22 chapters included in NAFTA), which overall aim to regulate intellectual property, anti-corruption, digital trade, financial services, labour rights, agricultural technology and biotechnology standards, textile production, environmental obligations, and non-discriminatory treatment, among others.
Key highlights of the USMCA include:International trade
Cross-border services - The USMCA establishes commitments between member parties for the liberalisation of cross-border financial services and market access.
To facilitate greater cross-border trade, the USMCA will raise the de minimis shipment value levels from 7% to 10% of the transaction value for small package/express shipments.
Rules of origin
Certification and verification of origin
While the USMCA was expected to include a renewed energy chapter for potential change in the energy sector due to the incoming government of Mexico's Andrés Manuel López Obrador, such a chapter was discarded. Similar provisions to the ones established for this sector under NAFTA, which ensured Mexican sovereignty in the framework of Mexico’s Energy Reform, were preserved.
A chapter on macroeconomic policies and exchange rate matters is included in the USMCA to address unfair currency practices.
Dispute settlement mechanism
The dispute settlement mechanism established under NAFTA, which allowed member parties to present allegations against other members’ unfair trading practices, is preserved. However, the investor-state dispute settlement mechanism, which allows investors to present allegations against member-country governments for discriminatory actions, will be limited to certain sectors for Mexico (e.g. oil and gas, power generation and telecommunication services).
The USMCA will be in force for 16 years, subject to review by the member parties in the sixth year of the new agreement. Every six years, the parties shall notify their intention to automatically extend the agreement for another 16 years.
This article was written by Oscar A López Velarde and Daniela A Iñigo Arroyo of Ritch, Mueller, Heather & Nicolau, S.C.
Oscar A. López Velarde (firstname.lastname@example.org)
Daniela A. Iñigo Arroyo (email@example.com)
Ritch, Mueller, Heather y Nicolau, S.C.
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