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Inaugural NAFTA-successor trade summit to convene

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Inaugural NAFTA-successor trade summit to convene

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The Office of the US Trade Representative will host its Mexican and Canadian counterparts today for the inaugural United States-Mexico-Canada Agreement (USMCA) summit.

Effective July 1, 2020, the USMCA, replacing the North American Free Trade Agreement, established new guidelines on issues such as intellectual property rights, country of origin rules, labor laws for Mexico and express shipments to Canada.

This week’s summit is likely to discuss the progress each participant has made towards adopting the new set of policies.

For Mexico, new USMCA manufacturing and labor law requirements will be the most difficult to meet, especially in its export automotive manufacturing sector. USMCA requires that manufactured vehicles contain 75% North American-produced content, up from 62.5%. Additionally, 40-45% of vehicle content must be made by workers earning $16 an hour or more. More broadly, USMCA provides protection for labor unions through a new dispute resolution mechanism.

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In the short term, the signatories may provide advisors or financial aid to support Mexico as it adapts new labor laws, and increases the minimum wage of Mexican automotive laborers. In the long term, Mexican automotive manufacturers will have to rethink their global supply chains to meet the 75% North American-produced requirement.

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