International Banking · July 20, 2020

How Your Business Can Capitalize on the USMCA Deal

As your business strategy evolves, perhaps you've considered tapping the market potential in Canada and Mexico. Or maybe some ongoing success in one of the neighboring countries has encouraged you to think about a deeper push into either nation.

Conditions have potentially improved for pursuing both approaches, thanks to the US-Mexico-Canada Agreement, or USMCA. Signed in January 2020, the USMCA deal replaces the North American Free Trade Agreement, which had set the terms for trade between the three countries since 1994. The USMCA's new terms aim to improve trade relations across North America, especially for small and mid-sized businesses.


Accounts for today's business environment

Recognizing the need for streamlined trade between the US and our neighbors to the north and south, the USMCA lays out guidelines for much of the economic activity that spans the continent. Perhaps most importantly, the USMCA deal pulls trade relations into the 21st century with language that directly addresses key factors such as:

  • Intellectual property
  • Digital trade
  • Trade secrets
  • Data storage and source code requirements
  • Currency exchange rate stability
  • Enforcement standards
  • Workers' rights
  • Select environmental matters

A new focus on smaller businesses

Historically, multinational trade agreements have focused almost exclusively on large companies moving large amounts of raw materials, components, finished goods and services between suppliers, manufacturers and distributors.

The USMCA deal retains an emphasis on large economic drivers such as the automobile, financial services, textiles and agricultural industries. Negotiators, however, also ensured that a considerable portion of the USMCA benefits small and mid-sized enterprises, or SMEs.

The rationale? With thousands of SMEs exporting tens of billions worth of goods to Canada and Mexico every year, dismissing this slice of the US business community would be short-sighted.

More specifically, the USMCA deal includes provisions intended to explicitly support SMEs such as:

  • Higher exemption levels for duties and taxes on cross-border shipments
  • Streamlined customs processes designed to cut bureaucratic delays
  • Digital trade-friendly regulations related to customs duties and technology
  • Expanded opportunities in the government sector
  • Fewer operational burdens on cross-border trade such as removing previous rules requiring an office in each country

In addition, the agreement opens a new channel for SMEs to engage with government officials on trade matters, as well as new governance guidelines for ongoing regulatory efforts.

How does it fit your company's strategy?

If your business operates within one of the highlighted industries, you may be able to capitalize on the opportunities in Mexico and Canada by reaching out to trade associations for insights on USMCA deal benefits. 

You might also bolster your cross-border marketing and distribution relationships through remote sales opportunities in either Mexico or Canada. If the online marketplace across either border is compelling, ensure your digital campaigns are designed to resonate with customers in each country. And if the government sector is part of your ongoing business model, you can explore opportunities with relevant entities in all three countries. 

Ultimately, whether you can successfully build out your business's footprint in Canada and Mexico hinges on your due diligence. The USMCA deal provides a new tool in that effort, helping you potentially find a clearer path toward expanding your operations across either border.

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