Canada and Mexico Trade Agreement

The Canada and Mexico trade agreement, commonly known as the CUSMA (Canada-United States-Mexico Agreement), is a free trade agreement between the three countries. It replaces the previous North American Free Trade Agreement (NAFTA), which was in place for over 25 years. The CUSMA came into effect on July 1, 2020, and has significant implications for the economies of the three countries.

The goal of the CUSMA is to modernize and enhance trade between Canada, Mexico, and the United States. It includes new provisions that address digital trade, the environment, and labor rights. Canada and Mexico have both welcomed the agreement, stating that it provides certainty and stability for businesses operating in North America.

One of the most significant changes in the CUSMA is the new rules of origin for automobiles. Under the agreement, a larger percentage of a vehicle’s parts must be produced in North America for the vehicle to qualify for duty-free treatment. This provision is meant to encourage the production of cars and trucks in North America.

Another key provision of the CUSMA is the removal of Canada’s protections for its dairy industry. Under the new agreement, Canada will allow greater access to its dairy market for American farmers. This has been a contentious issue for many Canadians who feel that their dairy industry is being sacrificed for the benefit of American agriculture.

The CUSMA has also been criticized for its lack of provisions to address climate change. Unlike the new European Union-Mercosur trade agreement, the CUSMA does not include any commitments to reducing greenhouse gas emissions or protecting the environment.

In terms of its impact on the Canadian economy, the CUSMA is expected to provide some stability and certainty for Canadian businesses operating in the United States and Mexico. However, it remains to be seen whether the new agreement will be able to boost trade between the three countries, as the COVID-19 pandemic has severely impacted international trade in 2020.

Overall, the Canada and Mexico trade agreement represents a major update to the North American free trade system. It has the potential to enhance economic cooperation between the three countries, while also addressing some of the concerns that were raised during the NAFTA negotiations. As with any free trade agreement, there are both benefits and drawbacks to the CUSMA, and its long-term impact on North American economies remains to be seen.