Final answer:
The USMCA introduces stricter rules of origin in the auto sector, gives US farmers increased access to the Canadian dairy market, and extends protections for pharmaceuticals. These adjustments are expected to benefit the United States by boosting domestic manufacturing jobs, improving agricultural exports, and setting favorable trade terms for digital products.
Step-by-step explanation:
Comparison of USMCA and NAFTA
The United States-Mexico-Canada Agreement (USMCA) came into effect on July 1, 2020, as a modernization of the North American Free Trade Agreement (NAFTA). The USMCA maintains many of the trade mechanisms of NAFTA but introduces new rules on labor, environmental standards, digital trade, and intellectual property. While the gains from trade continue under USMCA, there are several changes notably impacting the automotive, dairy, and pharmaceutical industries.
One of the main upgrades in USMCA is stricter rules of origin for the automotive sector, requiring 75% of a vehicle's components to be manufactured in North America to qualify for zero tariffs—an increase from NAFTA’s 62.5%. This aims to bolster manufacturing in the US but could also lead to higher auto prices. Another key amendment in the dairy industry allows US farmers greater access to the Canadian dairy market. For pharmaceuticals, USMCA extends the period that biological drugs are free from generic competition to 10 years, which could affect drug pricing.
Three benefits for the United States under USMCA include an expected increase in the number of domestic automotive jobs due to the shift in production requirements, a potential uplift for agricultural exports due to expanded market access, and improved terms of trade for digital products by prohibiting duties on electronic transmissions and enhancing data protection laws.
Considering the comparative advantage under USMCA, the United States may see improved efficiency in industries where they are already competitive, leading to an overall economy strength. While it is early to measure the full-scale impact of USMCA, these changes signal a push towards enhancing North American trade dynamics and protecting certain US industries.