On September 30 Canada reportedly decided to join the new North American free trade agreement meant to replace NAFTA and which will be called “United States-Mexico-Canada Agreement” (USMCA). Negotiations between Canada and the United States were protracted and resumed only after Mexico and the U.S. had reached their own bilateral agreement. It was expected that Canada would join eventually, despite having several differences with Washington, particularly on the issue of Canadian dairy industry protection. According to reports, the treaty will be signed when the leaders of the three North American nations meet at the end of November for the G-20 Summit in Buenos Aires, Argentina. The agreement will enter into force in the second semester of 2019, provided it is properly ratified. This would require a Congressional vote in the U.S.
The USMCA contains two important provisions regarding the auto industry which are likely to benefit car-manufacturing workers from all three countries and help boost investment in the North American industry. The first one requires that 75% -up from 62.5%- of vehicle parts be made in the region to qualify for tariff-free treatment, a move intended to boost production in North America. The second requires that, starting in 2020, 30% of vehicle production must be made by workers earning at least 16 USD per hour, approximately triple the current wage for manufacturing workers in Mexico. In 2023, the production percentage rises to 40 percent. The latter provision aims at discouraging firms from shifting work to Mexico, where wages are lower. However, Mexican labor unions are likely to welcome the outcome owing to the rise in minimum wages, further adding to President Andres Manuel López Obrador popularity among workers. That said, while the agreement will likely come into effect, the final outcome will greatly rely on U.S. domestic considerations following midterm elections in November.