Though USMCA may sound like the acronym for an offshoot of the Marine Corps, in this context it stands for the United States-Mexico-Canada Agreement. The shipping of goods between the United States, Canada, and Mexico is bound to affect the trucking industry.
History of the USMCA
Before we understand USMCA, we must first know the history of the North American Free Trade Agreement (NAFTA). NAFTA was ratified into US Law in 1993 under the Clinton Administration. It was the beginning of the end for NAFTA when on September 25th, 2016, then Republican nominee Donald Trump called NAFTA the worst trade deal in history.
USMCA is a rework of NAFTA, presumably to make it fairer in the eyes of the United States. President Donald Trump signed USMCA on January 29th, 2020. He went on to say “The USMCA is the most fairest, balanced and beneficial trade deal we’ve ever signed into law.”
As of the time of writing, the USMCA has not been ratified by Canada.
Impact on the Trucking Industry
The USMCA has the potential to cause a variety of changes within the trucking industry.
One example of such a change in the deal is requiring that 75% of a vehicle must be made in North America. This is up from 62.5% required from NAFTA. Vehicles would include heavy-duty trucks, so companies such as Freightliner and Mack and their U.S.-based employees stand to gain from this change in regulation.
At the same time, this change could potentially have negative effects on truckers as well. If a truck or car part is purchased from overseas, commercial big rig drivers are the ones to make sure the part(s) get from the port to the plant.
Chris Spear of the American Trucking Association (ATA) said the USMCA would be a positive to American truckers.
“Signing this improved trade agreement will strengthen America’s relationships with our nearest neighbors and put us all in a position to grow the North American economy. That economic growth will be a boon to the American trucking industry – which already moves 82% of the freight that crosses the Mexican border and 68% that crosses our border with Canada – as well as to consumers in all three countries.”
Beyond Trump, the United States government is also optimistic about the effects of USMCA on the economy. The United States International Trade Commission (USITC) predicting the creation of over 100,000 service jobs for Americans without college educations. Even if only 20% of those jobs involve transnational trucking, that would be an increase in such jobs by 22%.
The USITC also predicted that, annually, the USMCA would increase exports to Canada by $19.1 billion, exports to Mexico by $14.2 billion, and U.S. GDP by $68.2 billion.
Not only do these predicted increases directly affect the trucking industry, but they also indirectly affect logistics. By increasing the revenue of trucking’s largest customers, including agriculture and mining, trucking gets more business.
Reduced Competition on American Truckers
The USMCA also helps American truckers get a home-field advantage within the United States. These stipulations include:
- A Mexican carrier cannot haul freight whose origin point both begins and ends in the United States.
- The DOT has the power to determine whether or not a Mexican carrier obtains authority to transport within the United States. Carriers granted authority before the USMCA would be grandfathered into this new rule.
The lack of any mention on the limit of Canadian carriers in these stipulations may have some detractors scratching their heads and crying foul. American truck drivers, however, will see this reduce competition from foreign companies as a win.
The USMCA has yet to be ratified and signed in Canada, and until it is the agreement is not law. There is a slim chance that Canada will reject the agreement. Both Mexico and the United States have made strides in making it law. Rejecting the agreement would be a bad public relations move on behalf of the Candian Prime Minister and Parliament.
The increased trade between the triad of countries should substantially strengthen the commercial vehicle industry. After all, when demand for Canadian goods such as jewelry increased within the United States, there will have to be someone to deliver them.
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