The US-Mexico Free Trade Agreement: An Overview
The US-Mexico Free Trade Agreement, also known as the NAFTA 2.0, was signed on November 30, 2018, and came into effect on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA) that had been in place since 1994. The new trade agreement was a result of a two-year negotiation process between the United States, Mexico, and Canada.
The new agreement aims to modernize the NAFTA by addressing key issues such as digital trade, intellectual property rights, and labor laws. The deal covers a range of sectors including agriculture, manufacturing, energy, services, and e-commerce.
Under the US-Mexico Free Trade Agreement, 75% of automobile content must be made in the United States, Mexico, and/or Canada, up from the previous 62.5% requirement under NAFTA. Additionally, labor protections and wage requirements for auto workers were strengthened to prevent companies from moving production to countries with lower wages.
The new agreement also includes provisions to protect intellectual property rights, which is expected to benefit US companies in industries such as pharmaceuticals, biotech, and software. For instance, Mexico agreed to extend the patent protection period for biologic drugs from 5 to 10 years.
Digital trade, which was not addressed in the original NAFTA, is a major focus of the new agreement. The US-Mexico Free Trade Agreement includes provisions that protect online commerce, prohibit data localization, ensure cross-border data flows, and limit restrictions on electronic services.
Furthermore, the new agreement includes labor-related provisions that aim to improve working conditions in Mexico and ensure fair competition. Mexico agreed to strengthen its labor laws, increase workers` rights to unionize, and allow independent labor inspectors to monitor compliance. These provisions are expected to benefit Mexican workers and reduce the incentive for US companies to relocate production to Mexico in search of lower wages.
Overall, the US-Mexico Free Trade Agreement is a significant achievement for the North American region and marks a new era of trade relations between the United States and its neighbors. The new agreement is expected to benefit American workers, businesses, and consumers by promoting fair competition, protecting intellectual property, and modernizing trade rules for the digital age.