USMCA Affects Small Businesses: The Good and The Bad
The North American Free Trade Agreement (NAFTA) was drafted 24 years ago, so it was time for an update and some minor changes. It has been renamed the United States Mexico Canada Agreement (USMCA).
- The new trade agreement provides improvements in protecting intellectual property by increasing copyright protection after an author’s death from 50 years to 70 years.
- The agreement prevents the three countries from charging fees and duties on digital products and does not allow countries to force a company to use computers in that territory when conducting business there.
- Chapter 25 promotes small and medium-sized business growth and created a committee that will meet annually specifically to discuss and resolve SME issues related to the trade agreement.
- Strong protection for innovators in pharmaceuticals and agriculture.
- Enforceable environmental obligations including new protections for some marine species and marine habitat, improvements of customs inspections, and articles to improve air quality and forest management.
Here are some other specific industry changes that may affect your small businesses, both for the good and bad, mainly concerning Canada and China.
Mexico doubled its minimum shipment value to $100, so any products entering the country under that value will not incur taxes. As well, Canada’s no-tax import limit increased to $31 US from $20 and removed customs duties from orders worth up to $150 CA.
Cheap China Products
For businesses that take advantage of low-cost Chinese products, this will become more difficult or expensive with higher tariffs discouraging this type of business. However, other countries in Asia and India are not affected by the deal. The deal appears to be focusing on isolating China from the US, Mexico, and Canada in this way.
Auto Dealership Changes
Another goal of the deal was to bring manufacturing jobs back to the US. To incentivize this, businesses are exempt from tariffs if a vehicle is manufactured 75% in one of the three countries – an increase from the previous 62.5%.
By 2020, 30% of each vehicle must be manufactured by workers earning at least $16 per hour. In the short term this will help workers, but eventually, with higher costs of manufacturing come higher prices for consumers which could cause car sales to decrease slightly in the future.
US Dairy Farmers
Dairy farmers in the US have more access to Canadian markets with the new deal – 3.6% up from 3.25%. This includes milk, cheese, cream, butter, and more. Plus Canada will be removing tariffs on margarine and whey,
US Wine Makers
The Canadian market for US wine is substantial, with $1.1 billion in sales in 2017 alone. The deal eliminates unfair grocery store practices so winemakers are no longer at a disadvantage in certain territories.