The agreement between the United States of America, the United States of Mexico and Canada, commonly known as the United States-Mexico-Canada Agreement (USMCA), is a free trade agreement between Canada, Mexico and the United States in lieu of the North American Free Trade Agreement (NAFTA).    The agreement has been referred to as NAFTA 2.0 or “New ALEFTA, since many nafta provisions have been introduced and its amendments have been found to be largely incremental. On 1 July 2020, the USMCA came into force in all Member States. In addition, there is a provision that the agreement itself must be reviewed every six years by the three nations, with a 16-year forfeiture clause. The contract may be renewed for a period of 16 years during the six-year review period.  The introduction of the Sunset clause gives more control in the organization of the future of the USMCA in the hands of national governments. However, there is concern that this could lead to greater uncertainty. Sectors such as automotive require significant investment in cross-border supply chains.  Given the dominant position of the U.S. consumer market, it is likely that this will put pressure on companies to establish more production in the United States, with a higher probability of higher production costs for these vehicles.  U.S. wheat will be treated more equitably under Canada`s agreement to rate our wheat no less favourably than its own.
The terms of the USMCA remain in effect for a period of 16 years during which the parties may decide to review and/or renegotiate the terms or withdraw from the agreement. However, after six years, the duration of the sinking of the USMCA (16 years) may be revised and possibly extended if the parties believe that this would be beneficial. Overall, I think the new NAFTA is certainly a modern and updated version of its important predecessor, which the U.S. Department of Agriculture has described as one of the most successful trade agreements in history. A new addition to the USMCA is the inclusion of Chapter 33, which covers macroeconomic policies and exchange rate issues. This is considered important because it could set a precedent for future trade agreements.  Chapter 33 sets out requirements for currency and macroeconomic transparency that, in the event of a breach, would be grounds for litigation under Chapter 20.  The United States, Canada and Mexico currently meet all of these transparency requirements in addition to substantive policy requirements that comply with the international Monetary Fund`s articles.  During the 2016 U.S. presidential election, Donald Trump`s campaign included a promise to renegotiate or eliminate NAFTA if the renegotiations fail.  After the election, Trump made a series of changes that influenced trade relations with other countries.
The exit from the Paris Agreement, the cessation of participation in the Trans-Pacific Partnership negotiations and the significantly larger increase in tariffs with China were some of the steps he took, which reinforced the fact that he was serious about changing NAFTA.  Much of the debate about the virtues and errors of the USMCA resembles the debate on all free trade agreements (FTAs), such as the nature of free trade agreements as public goods, potential violations of national sovereignty and the role of commercial, labour, environmental and consumer interests in the development of the language of trade agreements.