What You Need To Know About NAFTA and USMCA

President Donald J. Trump, joined by Cabinet members, legislators and senior White House advisers, announces completion of the United States-Mexico-Canada Agreement during a press conference in the Rose Garden of the White House. October 1, 2018. Image: Official White House Photo by Stephanie Chasez

A big agreement was just made between the United States, Canada and Mexico.

It’s complicated–too complicated to explain fully here–but it’s good to have an idea about what it is and why it is important.

Back in 1994, the US, Canada and Mexico made a deal to all become “trading partners.” That means, each country would partner with the others to make it easy to buy and sell things and services back and forth. That deal was called NAFTA, the North American Free Trade Agreement.

When countries don’t have a deal like that, it’s sometimes hard for one country to sell things to another country.

It’s easier to understand with an example. This is a fictional example–it’s not real–to help illustrate how NAFTA works.

  • Let’s say Fakeland (not a real place) makes bicycles and they want to sell them in Canada. (Fakeland isn’t part of any agreement.)
    Canadians start buying lots of bikes from Fakeland. The people in Canada who make bikes might get upset: “Canadians are buying Fakeland bikes instead of our Canadian bikes!” So the Canadian government, which wants to support the Canadian bike makers, might decide that every Fakeland bike must cost more than any Canadian bike. That would encourage Canadians to buy the lower-priced Canadian bikes. (Assuming the Fakeland and the Canadian bikes are the same except for price.)

When a government increases another country’s price like that, it’s known as a tariff.

(This is a very simplified example. The agreement covers many, many things and is very long and complicated.)

The NAFTA agreement lets the United States, Canada and Mexico sell things back and forth with fewer tariffs.

Recently, US President Donald Trump said he doesn’t like the old NAFTA deal. He wanted to make a new deal that was even better for the United States. He started working with the Mexican government to create a new deal. Canada later joined the discussions.

After many hours of discussion, the three countries came up with a new deal.

It is called the United States-Mexico-Canada Agreement, or USMCA for short.

The new agreement is very much like the old, NAFTA deal. There are a few things that were changed, for some industries like the dairy industry that sells milk and milk products. The agreement also covers things like: how easy it is for someone to work in one of the other countries, and how easy it is for one of the three countries to invest in companies in the other two countries.

The new deal may be better than the NAFTA deal for Indigenous peoples, because it helps to protect more of their rights, according to an article by Perry Bellegarde, the national chief of the Assembly of First Nations, in Macleans magazine.

The new USMCA deal isn’t finalized yet. All three countries still have to sign off on it, but it is likely that will happen “toward the end of November,” according to Tom Blackwell from the National Post.

The Story Behind the Story: Point of View (2:57)

Related Links
Opinion piece by Perry Bellegarde, in Macleans magazine: By including Indigenous peoples, the USMCA breaks new ground.

VIDEO: Is the USMA a good deal? Financial Post, 7:02, discussion between Tom Blackwell (National Post) and Larysa Harapyn (Financial Post).

Overview of the deal by the CBC: Canada, US have reached a NAFTA deal–now called the USMCA

By Kathleen Tilly

Writing/Discussion Prompt
One of the reasons this story is so complicated is because of “Point-of-View.” Depending on who you are, you might see the deal differently. Here are some points-of-view to consider: Canada, US, Mexico, Indigenous peoples, consumers, manufacturers, farmers, investors. But there are lots of other people who are affected when three countries get together and sign a deal.

Who else do you think might have something to say about this deal?

Reading Prompt: Text Features
Often texts use features to help readers better understand new ideas. This article uses an example (a fictional country selling bicycles) to help explain how counties sell goods to one another. How does this example help you to better understand the article?

Identify a variety of text features and explain how they help readers understand texts (OME, Reading: 2.3).

Identify a variety of text features and explain how they help communicate meaning (OME, Reading: 2.3).

Language Feature: Acronyms
Acronyms are short forms of a series of words. They often combine the first letter or letters of each word. For example, NAFTA stands for North American Free Trade Agreement.

Why do you think people create and use acronyms? Can you think of 5 other acronyms that you know or use?