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Brief notes on the USMCA Brief notes on the USMCA
by Joseph Gatt
2019-12-23 09:41:40
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A few notes on the USMCA agreement, in no particular order.

-When NAFTA was signed in 1994, the US and Canada kind of knew that the trade balance would favor Mexico, but still went through with the deal, thinking that Mexico would finally overcome economic stagnation, would grow into a healthy economy, and being a healthy economy, would no longer send desperate migrants to the US and Canada.

-The game plan was as follows: free trade with Mexico, lots of US and Canadian companies flock to Mexico, millions of Mexican jobs created, Mexico becomes prosperous, NAFTA gets rave reviews. The extend free trade to Central America and the entire Western hemisphere, something of a Free Trade Agreement of the Americas, the Americas become prosperous, and we're a healthy continent on par with Western Europe.

amc001_400-To give a little bit of context NAFTA was signed in 1994. In the 1980s, Mexico defaulted in its debt, and the country was bordering with famine. Hyperinflation reached record highs, and in 1982, Fed Chairman Paul Volcker agreed to a 1.5 billion US Dollar emergency loan to Mexico. Mexico still could get its economy to work, and eventually, Canada and the US decided that a free trade agreement could help lift Mexico out of poverty.

-NAFTA did not work very well. For companies based in Mexico that had the intention of exporting to the US, believe it or not, bureaucratic permits were obtained very quickly. For American or Canadian companies aiming to export products to Mexico, the Mexican administration would drag its feet to grant permits. Result; while Mexican products were flocking to the US and Canada, US and Canadian products could only be found on the black market in Mexico.

-Furthermore, while NAFTA did lift a few million Mexicans out of poverty, it was not the success story the Americans and Canadians had dreamed of for Mexico. Poverty in Mexico is still widespread, and many Mexican states (Mexico is also a federal state) did not benefit from NAFTA.

-So the USMCA wants to fix these inadequacies. First, the USMCA intends to fix the American and Candian products sold on the black market problem. Right now, if you want an American phone or Canadian chocolate bars in Mexico, a lot of times you'll only find them on the black market. So with the USMCA, the Mexican administration will no longer drag its feet to grant import licenses to Canadian and American companies.

-With Mexican bureacracies no longer dragging their feet, Canada and the US are looking at a market of 130 million people in Mexico.

-Furthermore, Mexico has realized that by not allowing US and Canadian products to be freely imported, they are killing hundreds of thousands of retail and distribution jobs, and such bureaucratic inefficiencies are costing Mexican consumers a lot of money, as Mexican consumers often have to go to the black market and pay hard cash to buy American products.

-Finally, USMCA intends to benefit everyone, Canadians and Americans of course, but also Mexicans in all Mexican states. There should no longer be import and export license monopolies and it should no longer be a hanful Mexicans making all the money from imports and exports while the rest of the population in Mexico is stuck between the choice of starving or moving to the US.

-Finally, finally, there are many Mexican-Americans and Mexican-Canadians who would benefit from the fair trade deal. Dual citizens tend to speak Spanish and know the local culture, and will either export US and Canadian products to Mexico, or set up companies in Mexico to export in the US, or any other combination.


   
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