GLOBAL BUSINESS ENVIRONMENT
ASSIGNMENT No. 1: TRADE AGREEMENTS
1. Certain Trade Agreements:
• United States- Mexico- Canada Free Trade Agreement (USMCA)= The new United States Mexico Canada Agreement announced on October 1, 2018, will replace the North America Free Trade Agreement and significantly modify the legal agenda of what has possibly been the most fruitful cross-border trading connection in the world. (Beckett, Mark. In: Mondaq Business Briefing. Oct 18, 2018; Mondaq Ltd.)
• Canada- Costa Rica Free Trade Agreement= The Canada-Costa Rica Free Trade Agreement (CCRFTA) is a first-generation agreement that came into force since April 2001. This basically focus on trade in goods and does not include substantive provisions in areas such as cross-border trade in services, financial services, investment and government procurement.
• Canada- U.S Free Trade Agreement (CUSFTA)= October 4th marks a significant date in Canada-U.S. trade relations. In 1989, both nations settled to the Canada-United States Free Trade Agreement (CUSFTA). Crucial elements of the contract included the removal of tariffs, the reduction of many non-tariff barriers, and it was among the first trade agreements to discourse trade in services.
2. Research Plan on USMCA:
Among the three trade agreements stated above, I want to choose USMCA because I want to expand my computers and laptops business in Mexica as these electronic items are not manufactured in Mexico and the market for these items will be profitable in this country for a long period of time. Canada’s currency is also very strong as compared to that of Mexico’s so, it will be easy to set the business there. With the help of USMCA company enjoy 100% exemption for import and export duties, excise taxes and other taxes. The company can also enjoy the benefit of the availability of a highly educated and skilled workforce in less cost, but on the other hand there are also some issues like the language barriers, technology development, etc. which are to be solved for the better future of business in Mexico.
3. Some Controversial Issues related to USMCA:
• USMCA on Drugs= \”The new USMCA agreement would cover the individuality period that we apply in the U.S. to Canada and Mexico. This means that biosimilar drug companies may have to wait longer in those countries to bring their products to market, thus theoretically increasing profits of U.S. drug producers,\” Sachs said (States News Service. Oct 4, 2018).
• Does USMCA threaten a Canada- China deal? = Some of the people concerns that the new USMCA trade pact hinders the country’s freedom to trade with other countries such as China, but Canadian PM Justin Trudeau insists despite the clause in the USMCA agreement, Canada would continue to look at opportunities to strengthen its trade relationship with China.
• Keeping USMCA unclear at various points= The US kept various things unclear in the agreement as (Christian Gomez, The New American. Nov 19, 2018, Vol. 34 Issue 22, p14) “The pact is even worse than NAFTA regarding undermining American dominion and self- determination, in favor of North American integration spreading beyond trade to include labor and environmental policies.”
• Simultaneous emergencies= Simultaneous emergencies (e.g., natural disasters, climate change impacts, terrorist attacks) abroad or domestically could disrupt departmental operations and nothing is stated about this in agreement.
• Ocean and Fisheries issues= There are provisions dealing with fisheries management that relate to overfishing, fish stock health, conservation and protection of marine species and marine litter, which is to be strictly followed by all parties.
• U.S. Additional Market= The one major issue was the U.S additional market access for its dairy producers in the Canadian market. Canada’s dairy sector had been targeted for criticism by US President.
4. Parties Enjoying Benefits of USMCA:
• Canadian Economy= USMCA has had an overwhelmingly positive effect on the Canadian economy. It has opened up new export opportunities and helped attract significant foreign investment.
• Canada’s Forestry Industry= The new agreement benefits Canada’s forestry industry, which has faced a 20% U.S. duty on softwood lumber after Canada was ruled in violation of anti-dumping provisions last year.
• Arkansas Farmers= USMCA agreement has given some needed stability to Arkansas farmers. Arkansas Farm Bureau President, Randy Veach said, “We certainly needed an agreement as quickly as possible.” And after so much waiting finally they get what they want.
• Canada’s Food Industry= There were positive noises from parts of Canada’s food industry. Canola Council of Canada president Jim Everson said that open trade for canola will continue and we’ll now be able to export further- processed products.
• Auto Workers= The agreement includes new rules for the auto sector, such as requiring 40% of vehicle parts be made by workers paid at least $16 an hour, which is an advanced way to protect jobs for higher-wage workers.
5. Parties Feeling Uncomfortable with USMCA:
• Canadian Dairy Industry= According to this agreement, the US had additional market access for the dairy products into the Canadian market. Now Canadian dairy producers had to compete with the US producers, which is making them uncomfortable.
• Mexican Drug Producers= The Mexican drug companies had to wait for a longer period to bring their products to the market, as US producers continue to increase their sales and profits.
• Investors= The availability of investor- state arbitration in the investment protection chapter of the USMCA is limited to Mexico and the United States.
• Laborers= The serious goals of eliminating sex- based discrimination in the workplace, have been directly invoked.
As a Canadian company for laptops and computers, expanding to Mexico is not an easy task. USMCA trade agreement make it easy to operate in Mexico as the Canadian business can enjoy the 100% exemption from tariffs and taxes, which is beneficial to our company and helps to control extra costs. Due to the outdated technology, people get crazy after watching laptop and eager to buy one (if they want to spend less then they can go for computers). Plus, the electricity supply is also not that good in Mexico so people can charge their laptops and work later without electricity. One of the primary task is to find a person who has a bilingual skills and who can help to develop the market in Mexico.
Garcia, J. (2018). Tentative USMCA deal ends auto tariff threats as steel, aluminums levies remain. Uwire Text
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