FX.co ★ Ten facts about new NAFTA trade agreement

1. Cars

It will become harder to import cars from the participating countries of the agreement. The deal also mandates that 75% of a vehicle's parts must be made in North America, up from 62.5% in 1994.

This arrangement is in favor of the trade unions. However, now it will become a problem for the automobile industry.

2. Wages

Most notably, it requires that two fifths of car and truck parts that are exported as part of duty free trading in North America be made by workers earning at least $16 an hour.

This is additional spending compared to the expenditures on low-cost parts produced in Mexico.

3. Labour standards

After the new labor standards come into force, trade unions in Mexico will become more influential, and this will lead to higher wages. The Trump administration and its unexpected allies from the Democratic Party and the unions are particularly proud that they achieved high labor standards. But to be honest, some representatives of the Democratic Party say that they are dissatisfied with the level of implementation of these standards.

4. Expiration

The NAFTA agreement will be valid for the next 16 years, and after that, all three countries will be able to extend or change the conditions.

At the same time, once every six years, countries representatives will meet to discuss updates of the agreement.

Thus, potentially after 16 years, the agreement will probably have a completely different form and conditions.

Representatives of the Mexican and Canadian sides point out that the uncertainty on the agreement expiration reduces the level of investment in their countries.

Nonetheless, the companies are pleased that the Trump administration rejected the idea of expiring the agreement after 5 years.

5. Exchange rates

The signatories cannot artificially weaken currency exchange rates to gain the benefits of trade. And although the United States, Canada, and Mexico rarely receive such accusations, car manufacturers hope that in the future such a rule will be introduced into agreements with Asian countries.

6. Dairy market

The United States has managed to increase its exports of dairy products to the Canadian market, where the government controls prices and limits the amount of import imposing fairly high tariffs.

According to experts, it is the agreement on the dairy market that will cause approval within the United States, especially in the states where milk is produced the most. But in Canada, this point will clearly lead to disapproval.

7. Dispute resolution

Now participants will have to report on compliance with NAFTA agreement or its violation using a whole system of rules. The Trump administration has repeatedly spoken for easing the system of "control" and the resolution of disputes.

Lawyers will analyze the text of the agreement so that representatives of industry and trade unions can form their opinion and influence the legislators.

8. Tariff revision

Canadian officials managed to keep another arbitration system that allows the country to challenge U.S. duties on allegedly dumped or subsidized Canadian import, for example. This was achieved, despite the fact that American lumber producers and the US sales representative had wanted to scrap the system.

9. Tariff relief

After the new agreement comes into force, Mexico would be protected from any tariffs on vehicles and auto parts, and Canada got a similar deal.

However, it is noted that any respite for Canada from steel and aluminum tariffs would have to be negotiated separately.

10. No more NAFTA?

The North American Free Trade Agreement was heavily criticized in 2016 during an election campaign. Therefore, Trump sought to change the name of the agreement. So, now it will be called the United States-Mexico-Canada Agreement, or U.S.M.C.A., as officials told reporters.

The new agreement, as noted in the Canadian government, "will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home."