The North American Free Trade Agreement (NAFTA) was replaced by the United States–Mexico–Canada Agreement (USMCA) on July 1, 2020. This new agreement modernizes NAFTA and addresses a range of issues, including labor, environment, and digital trade. Let`s take a closer look at what the USMCA means for the United States, Canada, and Mexico.

One of the most significant changes in the USMCA is the new rules for auto manufacturing. Under NAFTA, a certain percentage of a vehicle`s content had to be made in North America to qualify for duty-free treatment. The USMCA increases this requirement and requires that at least 75% of a vehicle`s content be made in North America to qualify for duty-free treatment. Additionally, the agreement requires that 40-45% of a vehicle`s content be made by workers earning at least $16 per hour.

The USMCA also includes a chapter on digital trade, which is a new addition to the agreement. This chapter sets limits on data localization and prohibits customs duties on digital products. It also includes provisions on cross-border data flows and prohibits governments from requiring access to encryption keys.

Another important change in the USMCA is the increased protections for labor rights. The agreement requires Mexico to pass new labor legislation, which will provide Mexican workers with greater bargaining power and better access to unions. The USMCA also includes provisions that require Mexico to take steps to protect workers` health and safety and prevent child labor.

In terms of environmental protections, the USMCA includes a chapter on the environment that requires all three countries to enforce their environmental laws effectively. Additionally, the agreement includes provisions on air and water quality and wildlife trafficking.

Overall, the United States–Mexico–Canada Agreement represents a modernization of the North American Free Trade Agreement and addresses a range of issues that were not covered in the previous agreement. With its increased protections for labor and the environment, as well as its provisions on digital trade, the USMCA is a significant step forward for North American trade.