A New NAFTA? The USMCA’s Economic Implications

March 1, 2019

The United States-Mexico-Canada Agreement (USMCA) marks a new chapter in North American trade relations, with winners and losers emerging across industries.

The United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA), was heralded as a new era in North American trade when it was signed in 2018. The deal represents a significant shift in the economic relationships between the three largest economies in North America, with important implications for trade, business, and industries across the continent. Yet, much like the changes wrought by technological advances in the Industrial Revolution, the new agreement brings with it both opportunities and challenges, and not all sectors stand to benefit equally. The question remains: who are the winners and losers in this reshaping of trade?

The history of trade agreements in North America is as complex and fraught as the social dynamics portrayed in Dickens' novels. Much like the industrialists in “Hard Times” who attempted to reshape society according to their mechanistic ideals, the architects of the USMCA sought to revise the rules of trade with a focus on modernising the economy. This move, however, has come with consequences that ripple through various sectors—some benefitting, while others find themselves in decline, as the new trade environment alters the balance of power.

A New Deal for the Digital Age

Perhaps the most significant change in the USMCA is its focus on the digital economy. In recognition of the growing importance of technology and digital trade, the agreement includes provisions designed to promote e-commerce, protect intellectual property rights, and reduce barriers for tech companies. The deal also includes rules designed to facilitate data flow across borders, which will likely benefit companies in the tech industry, especially those in the US, which leads in areas like software development and digital services.

In some ways, this emphasis on the digital economy could be seen as a nod to the changing nature of commerce, reminiscent of the shift from agrarian economies to industrial ones during the 19th century. The digital revolution mirrors the rise of factories in the Victorian era, with technology now replacing the steam engine in driving economic growth. In the same way that Charles Dickens’ characters had to adapt to the rapidly changing world of industry, businesses today must adapt to the digital transformation that is sweeping the globe.

However, there is a caveat to this optimism. The digital provisions in the USMCA are not without controversy. Critics argue that the agreement may give too much power to tech giants, further entrenching their dominance in the marketplace. Some worry that it could stifle innovation by making it harder for small businesses to compete. This mirrors the concerns that arose during the Industrial Revolution, where unchecked monopolies and corporate giants began to dominate entire industries, stifling competition and innovation. In this sense, the USMCA's digital provisions may be seen as a double-edged sword, offering benefits for some but potentially reinforcing the power of a few dominant players at the expense of others.

Agriculture: A Trade-Off

Agriculture is another sector where the USMCA’s implications are particularly significant. The agreement includes provisions that are expected to benefit American farmers by giving them greater access to Canada’s dairy and poultry markets. For Canadian and Mexican farmers, however, the deal presents more challenges, as they will now face tougher competition from US producers. In this sense, the USMCA mirrors the dynamics of feudal societies, where power and wealth were concentrated in the hands of a few, while others—often the working classes or peasants—struggled to compete.

In the context of agriculture, the trade deal represents a shift towards more protectionist policies, particularly in the United States. While some American farmers will benefit from expanded market access, others may face heightened competition, particularly those who are less able to adapt to the modern, high-tech farming techniques increasingly used in the US. The contrast between the more traditional, artisanal farming methods employed in parts of Mexico and Canada and the industrial-scale agriculture found in the US brings to mind the tension between the old and the new that was central to the works of authors like William Blake, who saw the rise of industry as a threat to the natural world.

The Auto Industry: A Mixed Bag

The auto industry has also been significantly affected by the USMCA, with provisions aimed at encouraging the manufacturing of more cars in North America. The agreement introduces new rules requiring a greater proportion of car parts to be made in North America in order for the vehicles to qualify for duty-free treatment. This change is intended to boost jobs in the US and Mexico, but it has the potential to hurt Canada’s auto industry, which relies heavily on imports of parts from Asia.

For the auto sector, the shift is reminiscent of the challenges faced by Victorian-era workers who were swept up in the rapid industrialisation of the economy. The new rules could ultimately lead to job growth in certain regions, particularly in areas where manufacturers are located, but at the cost of job losses elsewhere. Much like the social upheaval of the Industrial Revolution, the changes introduced by the USMCA will likely create winners and losers—some regions will thrive, while others may be left behind.

The Cultural Shift: An Economic Revolution

One of the underlying themes of the USMCA is the cultural shift it represents. Much like the transformation of the Victorian landscape by industrialisation, this new agreement reshapes the very nature of trade between the US, Canada, and Mexico. It reflects a changing world order—one in which trade is increasingly driven by technological and digital advancements, and in which industries must adapt or risk being left behind. For all the talk of free trade and globalisation, the USMCA introduces more restrictions and regulations than its predecessor.

In this sense, the agreement could be seen as a modern-day equivalent of the "reform" movements of the 19th century, where economic systems and social structures were rethought in light of new realities. In much the same way that social reformers like Charles Kingsley called for changes to the harsh conditions of industrial society, the USMCA calls for changes to the structure of trade in North America—some of which are long overdue, while others may prove to be more divisive.

Winners and Losers: The Economic Paradox

As with any trade deal, the USMCA comes with its share of winners and losers. The winners will be those industries and sectors that are able to adapt to the new rules and take advantage of the opportunities offered by the agreement. These include tech companies, large-scale agricultural producers, and car manufacturers, particularly those in the US. However, other sectors—particularly small businesses, some workers, and those in industries like textiles—may find themselves on the losing end of the deal, facing increased competition or job losses.

This paradox of winners and losers is at the heart of the economic reality of trade agreements. Much like the world of literature, where characters often grapple with forces beyond their control, the USMCA reveals the tensions between the haves and have-nots in the global economy. In some ways, this economic paradox mirrors the conflicts between different social classes in the novels of the 19th century, where the interests of the wealthy often conflicted with those of the working poor.

Conclusion: The Road Ahead

In conclusion, the USMCA represents a significant shift in North American trade relations, one that promises to reshape the economic landscape of the region. While some industries stand to benefit from the new deal, others may struggle to adapt to the changing realities of trade. Much like the world of English literature, where characters are shaped by the forces of society and the economy, the USMCA reveals the ways in which trade agreements reflect the broader forces at play in the global economy. Whether the deal ultimately leads to greater prosperity for all remains to be seen, but one thing is certain: the world of trade, much like the world of literature, will continue to evolve, shaped by new ideas and new challenges.