From NAFTA to USMCA: What This Means for US Merchants
Trade negotiations between Mexico, the US, and Canada have concluded, and the updated NAFTA agreement, now called the USMCA (US-Mexico-Canada Agreement), has been agreed upon, with legislative approval still pending. With approval, most of the provisions of the new agreement will go into effect in 2020.
The NAFTA Agreement
The 25 year old NAFTA agreement had several provisions that were updated to reflect changes in global commerce and trade. The new agreement puts labor and environmental protections in place, mandating a $16.00 an hour minimum wage for workers in some industries and providing access to unions, protections for women, and other fair wage and labor practices. The trade agreement will continue the clause for independent special trade disputes, keeping trade negotiations out of the local courts. The agreement is in place for sixteen years, with a six year review period.
Since NAFTA went into effect, the size of the North American regional market has expanded considerably, now estimated at $25 trillion, and internet access through mobile technology has changed the face of global commerce. eCommerce, with both B2B and B2C markets growing rapidly, is estimated to continue its exponential growth; the global retail eCommerce market is estimated to be worth $4.5 trillion by 2021. B2B markets are showing a larger percentage growth than consumer retail.
Industries with cross-border supply chains, and eCommerce B2B and B2C businesses, will benefit by the new de minimis regime, which will raise duty thresholds. Duty thresholds from the US to Mexico are raised from $50 to $100; in Canada the raise is from $20 to $150. For Canadian firms, access to supply chains across the US border, and raw materials from their many trading partners, will allow innovation to flourish in the small and startup business space. For US eCommerce businesses, this new provision opens up Canadian and Mexican markets.
One of the challenges this open access to new markets brings is a requirement for integrated shipping solutions. With anticipated growth in the industry, eCommerce businesses will be looking for shipping solutions integrated with the major shopping carts, and with various fulfillment options. A cloud-based system with cost-comparison features, a variety of courier services, and tracking and invoicing features will support the new open markets across the border.
Canada has a population of 36.9 million, and significant infrastructure is already in place to support increased cross-border trade. They are considered a top-tier market, with an eCommerce market estimated at $30 million. The new de minimis regime changes will support the growth and development of industries that rely on cross border supply chains, and open the large Canadian market to US-based eCommerce platforms.
For eCommerce businesses ready to enjoy the opportunities of this new trade agreement, consider a Canadian company with experience and knowledge of the wide-range of integrated shipping services available. With a cloud-based system, and supporting multiple fulfillment options, eShipper can save businesses new to cross-border trade time and money, and support the most efficient shipping services.
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