By CRM staff
Toronto, Ontario — October 1, 2018 — Canada has reached a deal with Mexico and the United States regarding a trilateral free-trade agreement across North America. As of this morning, NAFTA is no more and in its wake we now have the United States – Mexico – Canada – Agreement or, USMCA. The new agreement is largely the same as NAFTA however, negotiators decided to change the name as they felt ‘NAFTA’ now has a negative connotation tied to it.
With U.S. imposed tariffs threatening the Canadian economy in the months leading up to the agreement, Prime Minister Justin Trudeau simply said “This is a good day for Canada,” as he walked out of the meeting late last night.
Tariffs have been consistently used by President Trump as a tool to push the deal along in favor of the U.S. Earlier this year, Global News spoke with Nathan Janzen, a top economist with RBC about the tariffs put in place by President Donald Trump regarding steel and aluminum. “If they can pick on steel, then they can pick on any industry,” Janzen told Global News. That kind of thinking, he added, ‘could lead Canadian businesses to press the pause button on business investment, especially for companies that are highly reliant on cross-border trade.’ Until last night, the auto industry was one of these fated industries sitting on the razors edge. However the deal reached last night shines new light on the auto industry in all three countries.
The deal boosts the percentage of each vehicle that must be made in the U.S., Canada or Mexico in order for that vehicle to be free from tariffs. Currently sitting at 62.5 percent, that share will increase to 75 percent starting in 2020. The move is likely to solidify the huge cross-border auto industry, which sustains facilities and economies across all three countries. However, the deal also states that 40 percent to 45 percent of auto content is to be made by workers earning at least USD$16 per hour, something that Canadians would not have to worry about as many make much higher wages. In the case of Mexico however, it would drastically reduce their ability to attract manufacturers based on their current USD$4 an-hour wages.
This morning, Unifor published a press release addressing some of the positive gains the deal brings with it, including a lift on tariffs, improvements on energy and labor regulations, and the bright future of investments in the auto industry.
Unifor President, Jerry Dias had this to say on the USMCA deal.
“This framework delivers significant improvements in auto.” Unifor called for increased rules of origin and higher wage thresholds in Mexico to rebalance auto manufacturing and stem the exodus of good paying jobs from Canada so we’re pleased to see those issues addressed.”
