The North American Free Trade Agreement (NAFTA) treaty went into effect in 1994. Since then, the borders and trade between the United States, Canada, and Mexico opened up.
This created new markets and new opportunities that didn’t exist at the time. It wasn’t a perfect treaty, however. It didn’t address one of the emerging technologies – the commercialization of the internet. Google, Spotify, and Netflix weren’t close to being created.
The USMCA is a new brand of public policy that does address digital trade among many other things.
What is USMCA? Keep reading to discover what it is and how digital trade is impacted.
What is USMCA?
Before we get into what is USMCA, it helps to understand what happened to NAFTA. When Donald Trump became president, and even during his campaign, he repeatedly referred to NAFTA as a horrible trade deal.
He went so far as to call it “the worst trade deal ever” and was on a mission to replace it with the most beautiful deal ever.
With these threats to withdraw from NAFTA, Mexico and Canada were forced to the negotiating table for a new deal. Over the course of a year, there were intense negotiations that resulted in USMCA.
The USMCA is the United States – Mexico – Canada Agreement. It’s the trade deal that’s essentially NAFTA version 2.0.
The agreement was signed on November 30, 2018, by President Trump, Canadian Prime Minister Justin Trudeau, and Mexico’s President Enrique Peña Nieto.
It still has to be ratified by all three government legislatures. Mexico ratified the agreement in June 2019. The United States and Canada have yet to do so.
USMCA and Digital Trade
One of the major revisions of the agreement has to do with digital trade. It wasn’t much of an issue when NAFTA was created. It’s a necessity now.
Customs and Taxes
Do you sell e-books, music, or digital courses? You might be wondering if you have to pay customs or taxes if you sell your products across borders.
You don’t need to do so, though you still have to keep in mind taxes within your own country. State taxes within America and HST taxes for Canadians may still apply.
It’s no secret that cybersecurity is a major issue for consumers and businesses. One of the provisions of USMCA is that the counties agree to collaborate to fight spam and hackers. They also agree to collaborate to protect consumers and work together to protect data privacy rights.
Content piracy has long been an issue for larger content creators like movie producers. This new trade agreement requires that a copyright is extended until 70 years after the death of the author. That’s a 20 year increase over current U.S. law.
It also doesn’t hold third-party providers like web hosts and broadband companies responsible if illegal content is used on their servers or systems as long as they don’t benefit from the content. This is otherwise known as the safe harbor rule.
Some groups contend that the “fair use” standards that have been used in previous agreements don’t apply to USMCA. In fact, they feel that fair use is largely eliminated.
Disclosure of Proprietary Information
Tech companies like Google and Facebook rely on complex algorithms to function. These proprietary algorithms determine the search results you get and what appears in your news feed.
If these companies have to disclose their algorithms and other proprietary information, they would be toast. The competitive advantage would be gone.
USMCA limits the authority of each government to ask these companies to disclose this type of information.
Free Digital Transmission
When you drive to Canada or Mexico, you’re subject to a border check before you enter either country. It’s the same when you’re driving into the U.S. from Canada or Mexico.
These border wait times can be long and painful at times. You can easily wait at the border for over an hour.
Imagine if information had to travel the same way. If you tried to access a Canadian site or a Mexican website, it would take forever for a site to load. The new trade agreement ensures that data can travel freely across borders.
What’s Next for USMCA?
The USMCA hasn’t been ratified by Congress yet and there are some concerns of the Democrats in the House of Representatives.
They think that it doesn’t have strong enough labor and environmental protections, nor does it have a good way to enforce the agreement. They take it further by stating that patient rights are at risk while pharmaceutical companies’ interests are front and center.
At this point, it’s unclear what will happen to the USMCA because of the political situations in Canada and the United States. Elections are looming in both countries, which will have a major impact on the agreement.
You’ll need to look for a legislature update regularly to find out the status of the trade deal.
USMCA and the Future of Digital Trade
What is USMCA? The USMCA is a landmark agreement that is meant to replace NAFTA. The agreement has been updated to reflect many changes over the last 25 years. One of the most obvious changes is in technology.
The internet became a commercial success to the point where just about all citizens in North America have some access to the internet. The trade agreement between the North American countries had to address digital trade.
While the topic is addressed, it’s unclear if and when the new agreement will be ratified. In the meantime, stay tuned and check this blog often for tech and business updates.