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New Trade Agreement Replacing NAFTA is now in Effect
Thursday, July 2, 2020
The new trilateral trade agreement, Canada-United States-Mexico Agreement (CUSMA), came into force on July 1, 2020. After three years of negotiations between the three countries the new agreement is finally replacing the North American Free Trade Agreement (NAFTA).
One in five Ontario jobs depend on trade and approximately $400 billion CAN in two-way trade in goods travels across the U.S. and Canada border in Ontario per year.
In 2019, free trade between the three countries was valued at $1.5 trillion dollars. Small to medium-sized enterprises (SMEs) make up the majority of businesses in Canada with 81% of exporting goods going to the US. While in a lot of areas the new agreement replacing NAFTA will remain the same, in other areas you will see more than just a name change to CUSMA.
Some key changes in CUSMA are:
- Automotive - increase in cars built in North America from 62.5% to 70%, and 40-45% of the car's value must come from high-wage areas where workers earn a minimum of $16/hr wages.
- Labour Rights - encourages Mexican workers to unionize. Allows Canada and USA to convene panels of international labour experts to hear complaints if Mexican factories are denying workers the freedom to organize and bargain collectively.
What this Means for Consumers
The changes to the trade agreement could mean we will see an increase in car prices in Canada.
The CUSMA also raises the de minimis threshold when shopping retail across the border to $40. With NAFTA all orders over $20 were subject to GST and HST. With the new threshold you will not pay taxes on orders under $40. Also, cross-border shipments will have to be $150 and over for duties to apply. By raising the thresholds this could mean faster processing times for smaller orders; less packages stuck at customs held up by red tape.
What this Means for Small and Medium-Sized Businesses
SMEs will benefit from:
- Increased competitiveness: CUSMA creates advantageous conditions for SMEs by ensuring 99.99% of Canadian exports to the U.S. and Mexico are eligible for duty-free treatment.
- More transparent and stable trade: CUSMA simplifies procedures for clearing goods through customs, and promotes fair business practices and creates a level playing field with enforceable rules on state-owned enterprises in CUSMA markets.
- Reduced barriers to trade: CUSMA addresses key challenges and barriers to doing business in the global marketplace, (technical barriers to trade), that disproportionately affect SMEs.
- Improves access for services companies: CUSMA enhances market access for Canada’s services industries, including financial services, providing a comprehensive set of investment protections.
- Increases your market presence: CUSMA lowers costs of participating in international trade, including the creation of new rules that address potential barriers to digital trade and protect the free flow of data across borders. It also maintains Canada’s preferential access to U.S. and Mexican markets for the temporary entry of business persons
Learn more about CUSMA and the Summary of Outcomes from the Government of Canada website.