Trump’s ‘Historic’ Trade Deal: How Different Is It From Nafta?

By Shawn Donnan, Andrew Mayeda, Jenny Leonard and Jeremy C.F. Lin

October 2, 2018, 9:00 AM EDT

The U.S., Canada and Mexico reached a deal on a successor to the 24-year-old Nafta, capping more than 13 months of negotiations and overcoming major sticking points from Canadian dairy market access to minimum wage requirements for automobile production. Here are the major differences between the old deal and the new one, called the U.S.-Mexico-Canada Agreement, or USMCA, which President Donald Trump hailed Monday as a historic achievement.

U.S.-Mexico-Canada Agreement

North American Free Trade Agreement

Cars

USMCA: The new deal increases the portion of a car that needs to be produced in North America to 75 percent to avoid tariffs. It also requires at least 40 percent of that come from factories where the average wage is $16/hour.

Nafta: The current Nafta, which came into force in 1994, requires that 62.5 percent of cars produced in the trade zone be made in North America. There's no minimum-wage requirement.

Dairy

USMCA: U.S. dairy farmers will be allowed to sell more milk to Canada.

Nafta: Dairy wasn't part of the original deal. The U.S. has long complained that Canada's system of domestic quotas protects its dairy farmers from foreign competition.

Disputes

USMCA: The new deal severely restricts chapter 11 between the U.S. and Mexico, while eliminating it between the U.S. and Canada. Chapter 19 and 20 both survived, virtually intact.

Nafta: Nafta has three kinds of dispute settlement systems. Chapter 11 provides a mechanism for solving disputes between companies and Nafta governments. Chapter 19 allows for cross-border mediation when Nafta partners clash over dumping or subsidy cases. Chapter 20 governs disputes between states.

Currency

USMCA: The new deal includes a new currency chapter that commits the three countries to maintain market-determined exchange rates and refrain from competitive devaluations of their currencies. The pledge won't have much effect on policymaking in the three nations, all of which have free-floating exchange rates. But it could serve as a template for future trade deals, giving the U.S. leverage over countries such as China.

Nafta: The current Nafta doesn't include a currency chapter. Automakers and some lawmakers have been calling for one as a way to shield against currency manipulation.

Sunset Clause

USMCA: The U.S. had demanded a sunset clause that would kill Nafta after five years unless the countries agreed to extend it. In the end, the countries settled on a 16-year term for the deal, with a review to identify and fix problems and a chance of a deal extension after six years.

Nafta: There is no automatic sunset clause under the current Nafta. But any of the three partners can withdraw from the agreement on six months' notice.