From Farms to Silicon Valley, U.S. Businesses Stand to Gain From USMCA

U.S. business leaders hope it is a return to stability, spurring investment by establishing more predictable trade relations after a year marked by uncertainty over the pact’s fate in Congress and President Trump’s threats to pull the U.S. out of the existing North American Free Trade Agreement.

“The approval of USMCA will send a signal of greater certainty to the market,” said

John Murphy,

senior vice president for international policy at the U.S. Chamber of Commerce. “Investment decisions that may have been clouded can now go forward without that uncertainty.”

Here’s a look at the trade accord’s expected impact in crucial sectors.

—Timothy Puko

Autos

USMCA contains new rules aimed at steering more investment and jobs to the U.S. auto industry.

When the deal comes into full effect, 75% of the value of completed cars and trucks—and of core parts such as engines, bodies and axles—must originate in North America to qualify for duty-free treatment. Nafta requires 62.5% of a completed vehicle’s value comes from the region.

The new agreement also requires 40% of a car’s value and 45% of a light truck’s be manufactured in North American facilities where salaried workers are paid an average of at least $16 an hour.

That essentially is a mandate for auto makers to locate some manufacturing in the U.S. or Canada over Mexico, where workers at assembly plants were paid less than $8 an hour in 2017, according to analyses by the Center for Automotive Research, based in Ann Arbor, Mich.

U.S. auto makers like

General Motors Co.

,

Ford Motor

Co. and

Fiat Chrysler Automobiles

NV generally back the agreement. They are better positioned than foreign rivals to meet the new rules. Foreign auto makers are lukewarm on the changes, largely because many of them use more parts and components from overseas.

Still, most companies will likely have to make some changes. For example, 41% of the content that goes into GM’s Chevrolet Equinox sport-utility vehicle—its No. 2 U.S. model—comes from Mexico, versus only 37% from Canada and the U.S., according to the National Highway Traffic Safety Administration. GM has said it can manage the new rules.

The U.S. International Trade Commission in April said the USMCA could lead to thousands of new jobs in the U.S. as manufacturers start sourcing more of their supplies from domestic partners. While the auto makers themselves might shed 1,500 jobs, automotive suppliers would likely add the equivalent of roughly 28,000 new full-time employees, according to the estimate.

“We may see the reshoring of manufacturing into the U.S., particularly for those suppliers of components that are core parts,” said

Ann Wilson,

vice president of government affairs at the Motor and Equipment Manufacturers Association.

—Ben Foldy

Agriculture

The USMCA is expected to increase annual U.S. agricultural and food exports by $2.2 billion, or 1.1%, according to the U.S. International Trade Commission. That comes from small increases of U.S. dairy, poultry, wheat and alcohol exports to Canada. More sugar and products with sugar would come to the U.S. from Canada.

For U.S. farmers, and agribusinesses such as Cargill Inc.,

Archer Daniels Midland Co.

and

Tyson Foods Inc.,

completing USMCA became more urgent as the U.S. trade battle with China deepened over the past year. Mexico and Canada in 2018 were the two biggest buyers of U.S. farm goods, representing $40 billion in sales, as shipments to China fell by more than half.

Nick Giordano,

head of government affairs for the National Pork Producers Council, said completing the USMCA would help hog farmers recover after Mexico’s retaliatory tariffs trimmed an average of $12 from the price of each hog sold in the U.S. in 2018.

Hog farmer Trent Thiele in 2018 delayed expanding his operation near Elma, Iowa, after Mexico levied tariffs on U.S. pork, in response to U.S. tariffs on Mexican steel and aluminum. After the three countries agreed to the USMCA later that year, Mr. Thiele moved ahead, investing about $1.5 million in new barns that will allow him to raise 12,000 more hogs.

“We can’t eat all of our pork domestically, so it’s a big deal to us to have these markets available and these trade agreements signed,” Mr. Thiele said. “We need to at least get one of these taken care of.”

—Jacob Bunge

Manufacturing, mining and energy

The deal would solidify a separate agreement in May to remove the Trump administration’s 25% tariff on steel and a 10% duty on aluminum from Canada and Mexico. The two countries also agreed to lift their retaliatory tariffs on U.S.-made metal. Removal of the duties was a condition for Mexico and Canada to move forward on negotiations for a broader trade deal and helped build congressional support for the USMCA.

Completion of the deal would help steelmaker

Steel Dynamics Inc.

’s plans for a new mill near Corpus Christi, Texas. The Indiana-based company intends to export steel from the mill to manufacturing hubs in northern Mexico. The new mill, which would make as much as three million tons of steel a year, is expected to open in 2021.

The deal also would strengthen trade provisions that govern exports and manufacturing of textiles and clothing in the three countries. Mexico and Canada are the top two destinations for U.S. textile exports, accounting for $12 billion of industry sales in 2018.

Aluminum producer

Alcoa Corp.

expects to save about $200 million a year because it is no longer subject to the 10% U.S. tariff on aluminum imported from the company’s smelters in Canada. Alcoa largely depends on its smelters in Canada to supply its U.S. customers with raw aluminum.

The deal would improve country-of-origin rules for thread, elastics and certain types of fabrics produced in the U.S., said the National Council of Textile Organizations, a trade group.

Oil and natural-gas producers, and refiners, are also backing the agreement. Its changes might have little effect for them, but industry leaders see its passage as crucial to solidifying an intertwined network that has developed since Nafta to trade energy across the borders as it is produced and refined.

—Bob Tita

Pharmaceuticals

U.S. drugmakers come away from the deal with more mixed outcomes. Revisions dealt a loss to makers of certain brand-name prescription drugs and a victory to manufacturers of lower-cost generic versions, such as Samsung Bioepis, by stripping out an intellectual-property provision that was in the original deal.

The provision would have set a minimum period of exclusivity in all three countries for brand-name biologics, or drugs made in living cells. The exclusivity periods would have barred competition from lower-cost, near copies of the brands, known as biosimilars.

Biologics include

AbbVie Inc.

’s Humira and

Johnson & Johnson’s

Remicade, both immunosuppressants, which list for tens of thousands of dollars for a year of treatment in the U.S. AbbVie has obtained more than 100 U.S. patents for Humira that are expected to shield it from biosimilars until 2023, about 20 years after it went on sale.

Rep. Jan Schakowsky (D-Ill.) said the original USMCA’s proposed exclusivity period for biologics would have locked in “high drug prices and expanded Big Pharma’s monopoly.” The new agreement eliminates the exclusivity period from the trade deal, she said, leaving it up to each country to set the periods individually.

Makers of brand-name drugs support longer exclusivity periods to generate more sales before facing generic competition, which they say is necessary to fund expensive research and development. A trade group, the Pharmaceutical Research and Manufacturers of America, supported the original USMCA and wanted to see the 10-year exclusivity period remain in the final ratified agreement.

A trade group for makers of brand-name biologics, the Biotechnology Innovation Organization, said Tuesday the revised deal “missed a critical opportunity to raise intellectual property standards in crucial markets.”

U.S. generic-drug trade group Association for Accessible Medicines, whose member companies include

Teva Pharmaceutical Industries Ltd.

and

Mylan

NV, said Tuesday the changes in the new agreement “support open markets, greater competition and improved cost savings for patients.”

—Peter Loftus

Technology

The pact includes several welcomed provisions for U.S. technology companies, such as the freedom to transfer and store digital information across U.S., Mexican and Canadian borders, according to

Stefanie Holland,

vice president of federal and global policy of the Computing Technology Industry Association. By contrast, countries such as China, Russia and India prohibit those activities, limiting overseas commerce opportunities for businesses of all kinds, she said.

Other provisions attractive to U.S. tech companies include copyright and legal protections that proponents say could serve as a blueprint for trade pacts with other countries. “It creates a gold standard for future trade agreements,” said

Jason Oxman,

chief executive of the Information Technology Industry Council.

One provision that was up for debate, but ultimately wasn’t stripped from the pact, ensures that businesses aren’t held liable for content their users post online, such as product reviews on Amazon.com, job descriptions on LinkedIn and posts on Facebook,

Twitter

and other social-media outlets. House Speaker

Nancy Pelosi

and other legislators had argued against extending that safety net beyond U.S. borders.

“This provision benefits businesses of all sizes and really is the backbone of the global internet today,” said

Jordan Haas,

director of trade policy at the Internet Association. “We are pleased that it is still part of the pact.”

—Sarah E. Needleman