Develop a roadmap for USMCA success


an introduction

The passage of the United States-Mexico-Canada Agreement (USMCA) through the US Congress with overwhelming bipartisan support, as well as strong political support in Canada and Mexico, emphasized the importance of the USMCA to North American trade and economic relations.1 It builds on the North American Free Trade Agreement (NAFTA) and largely keeps NAFTA’s commitment to lowering trade barriers even though it is backtracking on trade openness in the auto sector. The USMCA is also adding strong and timely new commitments, particularly on digital commerce, labor and the environment.

The USMCA’s importance to regional economic relations is amplified by the increasing geopolitical competition with China and the COVID-19 pandemic. This competition is about whether China will develop the world’s largest and most innovative economy in this century with its concomitant military prowess, or whether the United States and the West more broadly will retain its economic leadership and dynamism. These tensions lead to calls to reduce North America’s economic dependence on China. The pandemic has also underlined the importance of expanding and deepening resilient supply chains, which restart activities within North America will be vital to the region’s economic health and sustainability.

The USMCA presents an opportunity for the three countries – the United States, Mexico, and Canada – to “build back better” and draw on the region’s collective talent, capital and experience to develop North America’s most competitive, sustainable and inclusive economy, which can rival some of its fiercest competitors. Ideally, the USMCA would also provide a sustainable framework for the region to act as key partners on important and forward-looking issues.

At this critical juncture, Brookings’ Global Economics and Development Program established the USMCA Project for Research and Monitoring and to support the development of an ambitious but achievable USMCA agenda. This work includes a website featuring interactive data on North American trade and investment flows, tracking of USMCA committees and dispute resolution procedures, and tracking of compliance with USMCA obligations. It will also publish an annual report to assess progress and identify opportunities.

Maximizing the opportunities the USMCA presents to the region will require the three countries to see each other as true partners with a common cause. It will also be necessary to develop a new account of the agreement that demonstrates the economic and political importance of the USA-Mexico-Canada Agreement to US-Mexico-Canada relations. This viewpoint was widely shared by the recent Brookings Institution roundtable—participants comprised of high-level representatives from business, civil society, and former government officials from the three United States of America. The USMCA provides a framework for this strong partnership between the three countries.

This paper will provide background information on NAFTA and how it evolved into the current USMCA. It will then focus on five priority areas where progress is still required and where the USMCA can have the greatest impact:

  1. Building a more competitive economy in North America, including through trade and investment development;
  2. ensuring resilient supply chains;
  3. expanding digital commerce;
  4. support improvements in wages and working conditions; And
  5. Addressing climate change.

The conclusion provides recommendations on how the USMCA can help the region advance in each of these priority areas.

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