North America Trade Agreement-Impact on the Manufacturing Industry

North America Trade Agreement-Impact on the Manufacturing Industry

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By Gary W. Wallace, Managing Partner | Manufacturing Industry team

A trade agreement that will support manufacturing businesses in the 21st Century

In recent years, there has been a spotlight on U.S. trade with our North American neighbors and many questions as to whether our cross border trade was becoming more challenging. The United States-Mexico-Canada Agreement (USMCA) was introduced to facilitate North American trade. The USMCA provides an update to the 1994 North American Free Trade Agreement (NAFTA), which was negotiated before e-commerce. The new agreement helps to modernize 21st century trade and create a more level playing field between the countries. USMCA should have a positive impact on U.S. manufacturers.

Why is the New Agreement Important for U.S. Manufacturers?

  • U.S. manufactured goods exports to Canada and Mexico supports more than two million jobs
  • Most U.S. manufacturing sectors and most states count Canada or Mexico as their first or second largest foreign purchasers
  • Canada and Mexico are the top two export destinations for U.S. small and medium-sized enterprises, more than 120,000 of which sell their goods and services to our North American neighbors.
  • U.S. exports to Canada and Mexico more than any other country since the 2007 recession
  • Trade with the two countries reached nearly 1.4 trillion dollars in 2018

Highlights and benefits of USMCA for U.S. Manufacturers

  • Modernizes trade for the digital economy
    USMCA creates best-in-class rules to foster U.S. growth in the digital economy for firms of all sectors and sizes. For example, the agreement guarantees the freedom to move data across borders and prohibits the forced localization of data, thereby ensuring continued growth for a dynamic area of international commerce.
  • Protects intellectual property
    The agreement secures stronger protections for the full range of patents, copyrights, and related rights, trademarks, designs, and trade secrets. It also contains strong enforcement tools to guard against counterfeiting and piracy in order to promote continued U.S. innovation that supports and creates well-paying jobs across all major sectors of the economy.
  • Removes regulatory and technical barriers
    USMCA promotes regulatory compatibility and best regulatory practices for Information and Communication Technology (ICT) products, pharmaceuticals, medical devices, cosmetics, chemicals, and other products, while also improving rules prohibiting discriminatory technical barriers to trade.
  • Creates customs efficiencies
    In USMCA, customs procedures are modernized with regard to advanced rulings, simplified entry, risk management, single window, e-signatures, and self-certification of origin.
  • Maintains critical market access
    Approval of USMCA will ensure U.S. farmers, manufacturers, and service providers can continue to access Canadian and Mexican markets, and guarantees that virtually all U.S. exports will enter these markets tariff-free. For Canada, it eliminates some remaining barriers facing U.S. dairy and poultry exports. It also prohibits import restrictions on remanufactured goods.
  • Ensures fair competition
    The agreement establishes rules to ensure that central government state-owned enterprises (SOE) do not distort competition in the marketplace by guaranteeing regulatory impartiality. USMCA requires that SOE decisions be commercially motivated. It also ensures that antitrust investigations are fair, transparent, and based on sound economic analysis.

Mexico passed the USMCA on June 19, 2019. In the U.S., the agreement was approved by the U.S. House of Representatives on December 19, 2019, and in the U.S. Senate on January 16, 2020. President Trump signed the agreement on January 29, 2020. Ratification by Canada is expected early February 2020.

Keiter’s Manufacturing Industry team will continue to monitor the progress of USMCA. We will keep you updated on this topic and other regulations that impact you and your manufacturing business.

Additional Resources

Sources

U.S. Chamber of Commerce


The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


About the Author

Gary provides tax services to public and private entities and their owners in a variety of industry segments, including manufacturing, retail, real estate, and financial services. Gary has significant knowledge and experience in individual taxation, business taxation, including C and S corporations and partnerships. He advises clients on all aspects of tax matters, including tax accounting methods, multi-state tax matters, mergers and acquisitions, income tax accounting and representation with tax authorities. He is the Managing Partner of the Firm.

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