Everything about USMCA

The global economy has always been dependent on the good relationships between different countries, which affect the prices of goods and services and the processes of importation and exportation.

To maintain lawful trade and international commerce, nations have created different agreements over time that offer a safe space for the market to improve, with benefits for all the parties. One of the most important and famous agreements is the USMCA.

As a mexican custom broker, at Azafra we are committed to offering you helpful information regarding commerce. That is why in today’s article, we will explain everything about USMCA.  

If you want to know more about this agreement and its importance for the nations involved, we invite you to keep reading to understand its benefits and impact on the market.

What is a FTA?

First, knowing what an FTA is important before getting into specific details about USMCA. FTA, also known as Free Trade Agreement, is an arrangement between countries that establish new laws and obligations regarding trade, taxes, investments and more. 

Mexico participates in 13 FTAs with 50 countries worldwide, including the United States, Canada (part of the well-known NAFTA), Chile, Colombia, and other countries from Latin America and the European Union.   

This type of agreement aims to create opportunities for more accessible and more effective trade with other nations, where all parties benefit from increased competitiveness and the expansion of their products. 

United States-Mexico-Canada Agreement

The USMCA, or United States-Mexico-Canada Agreement, is one of the most important Free Trade Agreements because it involves a solid commercial relationship between the three nations of North America. 

The first agreement in which these countries started their economic commitment was The North American Free Trade Agreement (NAFTA) in 1994. Thanks to the agreement, tariffs on specified goods and services were eliminated over time to decrease market barriers and improve each country’s economy.

In 2020, to modernize this trade agreement, the USMCA was created to replace NAFTA and update this international consensus. It will keep the already stated commitments, such as null tariffs, but consider new aspects that result in a freer market with faired labour and environmental conditions.

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What does the USMCA include?

This new agreement includes enforcement of digital trade provisions and intellectual property matters, which needed to be added to NAFTA. It also includes obligations on customs inspection and the trade of goods.

The updates on this matter also offer opportunities to reduce outsourcing and high factory movement by enhancing labour laws. They also include some changes for certain industries, like the automotive industry, which now increases the percentage of motor vehicle parts produced in each region.

USMCA intends to create a fairer and stronger developed market for all of North America, with improvements for all parties, considering their specific needs. 

USMCA Benefits for Mexico

All FTAs benefit the involved nations, and the USMCA is no exception. The different factors and aspects of this agreement create advantages for the three countries in North America.

To review the different advantages of this agreement and its importance, especially in Mexico, we will be explaining the benefits that this nation obtains from the international relationship with the US and Canada.

1.- Lower costs for customs procedures 

As part of its goal to increase commercial exchange and circulation of merchandise, the USMCA creates an opportunity to lower the costs of customs procedures. This way, the import and export processes are easier to complete, creating a more efficient supply chain for this country. 

With it, Mexican custom brokers and custom agencies can offer better services for companies to commercialize their products internationally. 

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2.- Improve the regulatory processes

North American countries have the obligation to support the correct development of all regulatory processes to decrease the requirements that slow down economic procedures.  The agreement also aims for transparency to allow each country’s economy to develop fairly and legally.

3.- Enhance the development of digital commerce

With the evolution and growing significance of digital commerce, the USMCA enhances the development of electronic operations to transform and update how these nations, especially Mexico, carry out the commercial exchange of goods and services.

4.- Improve the economic competitivity 

Regarding the above, the agreement also allows Mexico to increase its competitiveness in a global context. In this way, North American countries’ opportunities are balanced with those of other nations to carry out fair trades of high value for their own economies.

5.- Reinforce the telecommunications market 

Finally, significant growth is promoted in the Mexican telecommunications market, with efforts focused on improving the quality of the services offered and their infrastructure for their own benefit and development.

As you can see, the renewal of the Free Trade Agreement between North American nations comes with different benefits and changes that allow their economies to develop better. Did you know what the USMCA was about? 

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