Trump signs USMCA, bringing NAFTA’s replacement closer to entry into force

The United States–Mexico–Canada Agreement (USMCA) has been ratified and signed into law in the United States, bringing the trade and investment deal one step closer to entry into force. Of the three countries involved, the only one that has not completed its ratification processes is Canada.

The USMCA would replace the long-standing NAFTA that has governed trade between the three countries since the mid-1990s. While the new agreement was signed in late 2018 and ratified by Mexico in June 2019, efforts to ratify the agreement in Canada and the United States have taken longer to conclude, albeit for different reasons.

The ratification of the agreement in the United States involved the negotiation of various changes with Canada and Mexico to the existing text, given concerns raised by many Democrats in Congress over whether the deal’s provisions were sufficiently stringent in the areas of labour and environment, both in terms of the rules themselves and the monitoring and enforcement mechanisms in place.

The final Protocol of Amendment features a series of amendments to the USMCA’s provisions, specifically on initial provisions and general definitions; automotive rules of origin; intellectual property rights; labour; environment; and a “facility-specific rapid response labour mechanism.”

Notable among the changes is revised language that would prevent USMCA parties from blocking the establishment of a dispute settlement panel, which had been one of the significant problems that had emerged under the original NAFTA in relation to state–state dispute settlement.

Another significant change is language in the environment chapter, specifically in a new footnote, which states that “for purposes of dispute settlement, a panel shall presume that a failure is in a manner affecting trade or investment between the Parties, unless the responding Party demonstrates otherwise.” Similar language has also been inserted in the labour chapter in relation to the enforcement of labour laws.

In Canada, the process to ratify the USMCA was put on hold in 2019 as a result of the country’s federal elections. The implementing legislation for USMCA, which is known as CUSMA in Canada, was introduced again into the Canadian Parliament as of January 29, 2020 for consideration.