The Rebranded NAFTA: Will the USMCA Achieve the Goals of the Trump Administration for North American Trade?

Abstract

The United States-Mexico-Canada Agreement (usmca) was the product of a renegotiation of the former North American Free Trade Agreement (nafta) that was intended by the Trump administration to “put America first.” This article analyzes the most important new provisions in the usmca that that administration believed would inhibit foreign investment in Mexico and reverse the offshoring of U.S. jobs. Some of the new provisions represent improvements over nafta, especially the limitations on investor-state dispute settlement and strengthened protections for labor rights. However, the new requirements for automobile production are likely to backfire by making North American automotive production more expensive and less competitive. On the whole, the formation of the usmca probably enhanced, rather than lessened, the confidence of foreign investors in the Mexican economy. However, the agreement is unlikely to bring about large gains in U.S. manufacturing employment or to boost the long-run growth of the Mexican economy.