New North American Deal is Agreed Upon
US-Mexico-Canada (USMCA) trade agreement has been agreed upon today. President Trump hails the agreement as a "Wonderful new deal". While U.S. and Mexico agreed upon terms of the agreement months ago, final agreement with Canada was reached just today.
The deal is significant because it is central to North American automaker industry. The reworked deal will seek to move manufacturing jobs away from Mexico and into U.S. and Canada. While details of the agreement were not reported my news outlets, we do know that clauses to increase worker compensation were included. For example, 40% of components manufactured in the USMCA zone must pay minimum wage of $16. These clauses are designed to artificially increase worker compensation and reduce Mexico's advantage of cheap labour.
For Canada, the agreement is vital to its national security as over 70% of Canadian trade is done with U.S.. Prior to agreement news outlets reported that U.S. access to Canadian dairy market was a sticking point. Today it is reported that Canada will concede 3.5% of the dairy market to U.S. farmers. The deal also increases patent rights for biologic products from 8 to 10.
Canadian Foreign Affairs minister Chrystia Freeland called the agreement "A victory for all Canadians". This statement from Freeland is rather surprising since CBC reports that Trudeau administration attempts to help dairy farmers through compensation to affected farmers and help prevent rising drug costs through national pharma-care plan. In translation, Trudeau government will give handouts to those adversely affected by the deal thereby taxing all citizens.
The agreement is expected to be signed in coming months. Before this happens it is expected that both Canada and Mexico will try to leverage the agreement to eliminate or reduce steel and aluminum tariffs imposed by Trump administration. Canada exports over 80% of its aluminum to United States. Since the tariffs were imposed, the price of steel has rose by 31%. U.S. favors a scheme where quotas on imports are placed to protect its own steel manufacturers.
In the end, these negotiation are a classic representation of special interest agreements. The trade agreement should be simple and transparent, allowing free market forces to choose winners an losers. Instead, special interests are picking winners and losers, restricting growth of economy and prosperity.
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