NAFTA to USMCA Means What To You?

Trump has put forward a replacement for NAFTA which is called USMCA, short for US, Mexico, Canada Agreement. Some sources claim it is really no change, while others claim it makes big changes.

Right now it appears that Canada and Mexico will sign the agreement. However, it still must be ratified. Seeing that it is the outgoing president of Mexico signing the agreement, if the new Mexican president objects to some part of it, he may be able to withdraw support any time before ratification. Since CONgress will be out of session and it must be ratified by the US CONgress, that means it would not happen until at least January. Plus if Democrats gain a majority in midterms, they may refuse to ratify just so Trump does not have a “win”. They don’t need a reason other than that.

There are many sources that explain what it contains, so I won’t go into a lot of that detail here. I’m more about what effects it has on the ground.

One part I find good at first inspection. The agreement includes protections for internet companies so they are not liable for content created by users. This actually seems like it would reduce censorship. It also prohibits duties on music and e-books.

On the other hand, it also extends intellectual property rights to 70 years beyond the death of a writer/creator. This mostly has implications for media companies that print materials in the public domain and beyond copyright protection. The purpose of this is to protect corporate publishing profits. If you even inadvertently publish (or quote) from a book published after 1948, you may be subjected to a lawsuit if you do not get permission beforehand. Bloggers! CYA!!! That is one good reason I do not post sources or provide many quotes that are not already public property. In general it does mean the prices on many older books will increase. It can also lead to more censorship if the holder of the copyright denies permission to reprint or quote certain materials.

One part most sources are NOT mentioning. It extends the period of trade protection further for medications before they can be made generic. The result is increased drug pricing in all three countries.

It has requirements that vehicles must contain 75% of components to be produced in North America to avoid tariffs. So, that does NOT mean they must be produced in the US. It means anywhere in the US, Mexico or Canada.

It also implements a mandate that 40% to 45% (Seems that should be more concrete) of auto workers in any of those countries be paid $16 an hour or more.

What the agreement does NOT do is reduce or eliminate tariffs on steel.

All these combined means vehicle prices will be increasing considerably in the immediate future. That will include used vehicles because as new vehicles increase in price, so do used ones. This is happening at a time when new vehicle repossessions have been increasing over the past two years or more.

Then there is the requirement for US dairy farmers to have increased access to the Canadian market. That will mean Canadian dairy farmers will have to reduce production. The end result is that milk and milk products will increase in price in the near future. I can also foresee some protests happening in Canada. Another good reason to drink almond milk, where I am concerned.

Some claim this will mean more auto industry jobs here. Maybe, maybe not. Some US car factories are owned by other countries in some way. Those companies could simply close up shop here. Then even with increased labor costs, it will still be cheaper and more profitable to produce vehicles in Mexico because 55–60% of workers there have no mandated wage. Then, the increased cost of vehicles means fewer will be produced overall.

Downstream, there is no increase or protection installed for American jobs or wages. IF it creates or maintains jobs in specific industries, those industries are very limited and will have no positive effect on the overall economy whatsoever.

When the effects of this are combined with the effects of tariffs and sanctions on various countries, we are going to see inflation across the board for vehicles, books, milk, steel, gas, oil and anything else being taxed or sanctioned. (Just think of sanctions as rationing.)

In short, get ready to pay more for basically everything.

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