United States–Mexico–Canada Agreement facts for kids
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| Type | Free trade agreement |
| Drafted | 30 September 2018 |
| Signed | 30 November 2018 10 December 2019 (revised version) |
| Location | Mexico City, Mexico |
| Effective | 1 July 2020 |
| Condition | 3 months after notification of each state that all internal procedures have been completed |
| Expiration | Upon end of 16-year term (renewable) |
| Ratifiers | |
| Languages |
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The Agreement between the United States of America, Mexico, and Canada (USMCA) is a special deal between the United States, Mexico, and Canada. It helps these three countries trade goods and services more easily. This agreement took the place of an older one called the North American Free Trade Agreement (NAFTA), which started in 1994. Some people call the USMCA "NAFTA 2.0" because it keeps many of the old rules but also adds new ones.
The USMCA region is one of the biggest free trade areas in the world. It includes over 510 million people. The total economy of these three countries is huge, about $30.997 trillion. This is almost 30% of the entire global economy.
The three countries officially agreed to the USMCA on October 1, 2018. Leaders from each country signed it on November 30, 2018. These leaders were U.S. President Donald Trump, Mexican President Enrique Peña Nieto, and Canadian Prime Minister Justin Trudeau. A newer version of the agreement was signed on December 10, 2019. All three countries approved this updated version. Canada was the last to approve it on March 13, 2020. The USMCA officially started on July 1, 2020.
The main goal of the USMCA was to update the old NAFTA agreement. It added new rules for things like intellectual property (ideas and inventions) and online shopping. It also borrowed some ideas from another big trade deal called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Key changes in the USMCA include stronger rules for the environment and workers' rights. It also encourages more car production in the U.S. and gives the U.S. more access to Canada's dairy market. Canadians can also buy more U.S. goods online without paying extra taxes.
Contents
Understanding the Agreement's Name
The United States–Mexico–Canada Agreement is mostly based on the North American Free Trade Agreement (NAFTA). NAFTA began on January 1, 1994. The new agreement came after more than a year of talks. These talks included discussions about possible extra taxes (called tariffs) that the United States might put on goods from Canada. There was also talk about making separate deals instead of one big one.
During the 2016 U.S. presidential election, Donald Trump promised to change NAFTA. He said he would cancel it if new talks didn't work. After he became president, Trump made many changes to trade rules. He left the Paris Agreement and stopped talks for the Trans-Pacific Partnership. He also increased tariffs with China. These actions showed he was serious about changing NAFTA.
Each country calls the agreement by a different name. In the United States, it's the United States–Mexico–Canada Agreement (USMCA). In Canada, it's the Canada–United States–Mexico Agreement (CUSMA) in English. In French, it's the Accord Canada–États-Unis–Mexique (ACEUM). In Mexico, it's called Tratado entre México, Estados Unidos y Canadá (T-MEC). People often call it "New NAFTA" because it replaced the old NAFTA agreement.
Comparing the Three Countries
The USMCA involves three large and important countries. Here's a quick look at some facts about them:
| United States of America | Mexico | Canada | |
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| Population | 345,257,335 (as of 2024, incl. Guam, Puerto Rico, and the U.S. Virgin Islands[ref]) | 129,388,467 (as of 2024[ref]) | 40,528,396 (as of 2023[ref]) |
| Land Area (Sq. Km) | 9,156,552 km2 (incl. Puerto Rico) | 1,943,945 km2 | 9,093,507 km2 |
| Land Area (Sq. Mi) | 3,535,363 mi2 (incl. Puerto Rico) | 750,561 mi2 | 3,511,021 mi2 |
| Population density | 37.5/km2 | 66.1/km2 | 4.3/km2 |
| Exclusive Economic Zone | 11,351,000 km2 | 3,269,386 km2 | 5,559,077 km2 |
| Capital city | Washington | Mexico City | Ottawa |
| Currency | United States Dollar | Mexican Peso | Canadian Dollar |
| GDP Nominal ($, in millions) 2023 | $27,067,158 (incl. Puerto Rico) | $1,811,468 | $2,117,805 |
| GDP Nominal ($) 2023 Per Capita | $80,412 | $13,804 | $53,247 |
How the Agreement Was Negotiated
The official talks to create the USMCA started on May 18, 2017. The U.S. Trade Representative, Robert Lighthizer, told Congress he wanted to renegotiate NAFTA. The talks began on August 16, 2017, and continued through eight official rounds.
A deal with Mexico was reached on August 27, 2018. At that time, Canada had not yet agreed to the terms. Because Mexico's president, Enrique Peña Nieto, was leaving office soon, there was a deadline. The final agreement text needed to be ready by September 30, 2018. Negotiators worked very hard and finished the draft text just before midnight on that day. The next day, October 1, 2018, the USMCA text was officially released.
The leaders of all three countries signed the agreement on November 30, 2018. This happened during a big meeting called the G20 summit in Buenos Aires, Argentina. The agreement was written in English, Spanish, and French. It would become official after each country approved it through their own laws.
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U.S. Ambassador to Canada Kelly Craft played a big role in the trade talks between the U.S. and Canada. Her work helped lead to the new trade agreement being signed.
On December 9, 2019, news reports said that negotiators from the three countries had agreed on how to enforce the rules. This meant a final deal was very close. Mexico agreed to a rule about a minimum wage for Mexican car workers. This wage would be checked by a neutral third party.
What the Agreement Covers
The USMCA covers many different things. These include farm products, manufactured goods, and rules for workers. It also includes rules for online trade. Some of the most important parts of the agreement are:
- Giving U.S. dairy farmers more access to the Canadian market.
- Rules to make sure more cars are built within the three countries.
- Keeping a system to solve disagreements, similar to the one in NAFTA.
Dairy Products
The dairy rules allow the U.S. to sell more dairy products to Canada without extra taxes. This means the U.S. gets tariff-free access to 3.6% of Canada's dairy market. Canada also agreed to change some of its dairy pricing rules. Canada's system for managing its own dairy supply will stay in place. Canada also agreed to raise the amount Canadians can buy from the U.S. online without paying extra taxes. This limit went from $20 to $150.
Cars and Trucks
The USMCA has new rules for where car parts must come from. For a car to be considered "North American," a certain percentage of its value must come from within the U.S., Mexico, or Canada. Under NAFTA, this was 62.5%. The USMCA increases this to 75%. This change aims to encourage more car production within these three countries. It could lead to higher costs for making cars.
Small Shipments
To make cross-border trade easier, the USMCA changed rules for small shipments. Canada raised its limit for tax-free shipments from C$20 to C$40. It also allows duty-free shipments up to C$150. Mexico continues to allow US$50 tax-free shipments and duty-free shipments up to US$117. These changes make it easier for small and medium-sized businesses to trade across borders.
Worker Rights
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The USMCA requires Mexico to pass laws that improve the ability of workers to form unions and bargain for better conditions. Mexico's president, Andrés Manuel López Obrador, introduced laws to meet these international standards.
There's also a new rule about minimum wages in the car industry. Between 40% and 45% of cars made in North America must come from factories that pay workers at least US$16 per hour. This rule will be slowly put into place over five years.
Protecting Ideas and Inventions
The USMCA changes rules for copyright in Canada. Copyright protection for creative works will now last for the life of the creator plus 70 years. For sound recordings, it will be 75 years. Companies that make new agricultural chemicals will have at least 10 years to sell their products without competition. This is double the old time of 5 years. Designs for industrial products will be protected for 15 years, up from 10.
The USMCA also has strong rules against stealing copyrighted movies in theaters. It allows customs officials to stop goods that are suspected of being fake.
Medicines
The USMCA helps protect patents for new medicines. If there are delays in getting a medicine approved, its patent can be extended. This gives the company more time to sell it without competition.
For new medicines, generic companies cannot use the original company's safety and testing information for at least five years. This protects the original company's investment. Canada already had an eight-year protection period for new drugs, so it didn't need to change its rules.
Solving Trade Problems
The USMCA has ways to solve disagreements between the countries. One way is for countries to complain if they think a rule of the agreement has been broken. Another way is for a special panel to hear cases about unfair taxes on imported goods. The USMCA kept these ways to solve problems.
There was also a system where large companies could sue governments over policies they thought were unfair. Canada largely removed itself from this system in the new agreement.
Agreement Review and Expiration
The agreement includes a rule that the three countries must review it every six years. The agreement itself has a 16-year expiration date. However, it can be extended for more 16-year terms during these six-year reviews. This "sunset clause" gives countries more control over the future of the USMCA. It can also create some uncertainty for businesses that invest a lot in cross-border trade.
Currency Rules
A new part of the USMCA is about how countries manage their money (currency) and economies. This is important because it could set a new standard for future trade deals. It requires countries to be open about their currency policies. If a country breaks these rules, it could lead to a dispute. All three countries currently follow these rules.
Future Trade Deals
The USMCA also affects how member countries can make future trade deals. If a USMCA country wants to start trade talks with a country that has a "non-market economy" (like China), they must tell the other USMCA members three months in advance. The other USMCA countries can then review any new trade deals that are made. Many believe this rule is aimed at China.
Preventing Currency Manipulation
The USMCA requires countries to follow rules from the International Monetary Fund (IMF). These rules help stop countries from unfairly changing the value of their money to gain a trade advantage. Countries must publicly share information about how they manage their currency. The IMF can help settle disagreements if countries think currency rules are being broken.
Rules for State-Owned Businesses
The agreement also has rules about businesses owned by the government (called state-owned enterprises). It prevents these businesses from getting unfair help from their government compared to private businesses. This helps keep trade fair.
How the Agreement Became Law
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The USMCA was signed on November 30, 2018. However, there were still disagreements about worker rights and steel and aluminum. Because of this, a revised version was signed on December 10, 2019. All three countries approved this updated agreement by March 13, 2020.
United States Approval
In the United States, the process for approving trade deals is called "fast track" authority. This means Congress has a limited time to vote on the agreement.
Some groups in the U.S. had concerns about the agreement. For example, some Republicans did not like parts of the agreement that mentioned rights for LGBTQ+ and pregnant workers. As a result, the final version signed by President Trump changed this language. It now says each nation will have "policies that it considers appropriate to protect workers against employment discrimination."
On December 19, 2019, the United States House of Representatives voted to pass the USMCA. The vote was 385 to 41, with support from both major parties. On January 16, 2020, the United States Senate also passed the agreement by a vote of 89 to 10. President Trump signed the agreement into law on January 29, 2020. This officially replaced NAFTA.
On April 24, 2020, the U.S. announced that the new trade deal would start on July 1, 2020. On June 1, 2020, the U.S. released rules to help put the agreement into practice. NAFTA was officially replaced on July 1, 2020.
Mexico's Approval
On June 19, 2019, the Senate of Mexico voted to approve the treaty. The vote was 114 to 4. The treaty was passed again by the Senate on December 12, 2019, with a vote of 107 to 1.
On April 3, 2020, Mexico announced it was ready to start the agreement. Mexico's president, Andrés Manuel López Obrador, believes this trade deal will help Mexico's economy. He thinks it will bring more foreign investments, create jobs, and increase trade.
Canada's Approval
On May 29, 2019, Prime Minister Justin Trudeau introduced a bill to approve the CUSMA in the House of Commons. However, Canada's Parliament was dissolved for an election, so the bill had to be reintroduced later.
On December 10, 2019, the three countries reached a revised CUSMA agreement. On January 29, 2020, the bill to approve CUSMA was reintroduced in Canada's House of Commons. It passed a second vote on February 6.
On March 13, 2020, the House of Commons passed the bill to implement CUSMA. This happened just before Parliament paused its work due to the COVID-19 pandemic. On the same day, the Senate also passed the bill. The Governor General, Julie Payette, officially approved it, making it law. This completed Canada's approval of the agreement.
On April 3, 2020, Canada told the United States and Mexico that it had finished its approval process for the agreement.
See also
- North American integration
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
- North American Free Trade Agreement (NAFTA)
- North American Leaders' Summit (NALS)
- Trans-Pacific Partnership (TPP)
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