USMCA: A Modern Agreement for the Digital Age
September 3, 2019
American aerospace products move people and goods around the world, make space exploration possible, and provide technological capabilities that impact daily life in countless ways. But how we move, connect, and live has changed dramatically over the last 25 years since the North American Free Trade Agreement (NAFTA) went into effect. That is one of the overarching reasons why the American aerospace & defense (A&D) industry strongly supports the United States-Mexico-Canada Agreement (USMCA).
Maintaining the free flow of aerospace items between Canada, Mexico, and the United States will benefit the aerospace industries in all three countries. The USMCA will modernize trade with our North American trading partners in four areas that are particularly relevant to the aerospace industry: market access for goods, intellectual property, digital trade, and customs and trade facilitation.
Why are these sections so important to our industry? Let’s walk through some examples:
Market Access: Airplanes are made up of hundreds of thousands of parts and components. The world relies on U.S.-built aircraft to move people and goods across the globe, but many parts or components come from other countries – like Canada or Mexico.
The USMCA includes a commitment to limit increases of duties or customs on goods, which means fewer surprises when one of our companies needs to import a part, particularly one not found in the domestic supply chain, from one of our neighbor countries. Broadly, this commitment supports the free flow of goods, and allows the U.S. aerospace industry to build our trade surplus while maintaining our leadership in the field.
Intellectual Property: As a leading innovator, the American A&D industry continues to develop cutting-edge technologies and aircraft (such as air taxis) that will change the way we move, connect, and explore in the future. But research & development can take years as a technology goes from concept to prototype to finished product available on the global market. And during that time, the product developers are vulnerable as they try to protect their intellectual property (IP).
The USMCA’s Intellectual Property chapter will help protect American technologies and continued U.S. R&D investment by requiring the Canadian and Mexican governments to establish criminal, civil, and administrative procedures and remedies to combat IP theft. This also sets a standard for future agreements, as the U.S. can use the USMCA as a model in future negotiations.
Digital Trade: When NAFTA was signed, there was no digital economy. Since then, countless technological advances including Blockchain, 3D printing, and digital design have significantly changed daily life and how we do business.
For example, Blockchain can now be used to track and verify parts needed for maintenance or a repair. Historically, mechanics have tracked replacement parts and components using paper-based systems, but that can make it harder to track exactly how the primary system, a helicopter for example, was changed as a result of being refurbished. In the case of an aircraft, it could easily have undergone two or three significant overhauls within a 10-year period.
Say a fleet of aircraft – based in a few different locations – is due for routine maintenance. The mechanics would need to be able to order the part that needs to be replaced and would need to know which aircraft need the new part. The traceability provided by a robust digital system could be a tremendous help, making it possible to find the necessary part, verify its authenticity, and track its journey from a supply shop in Canada, across the border, and to the helipad in Anytown, USA.
The USMCA’s chapter on Digital Trade normalizes digital products, such as Blockchain, and protects personal information, among other 21st Century standards. The chapter also promotes coordination and cooperation on cybersecurity, which is especially critical to our industry, as our industry is often a priority target for hackers.
Customs and Trade Facilitation: Arriving at the border can be a cumbersome process for people and goods alike, but it helps to know what to expect. The USMCA will make border crossings more efficient by standardizing the rules for exporters and importers, and will likely even reduce administrative delays and transaction costs in cross-border trade. The agreement lays out new procedures that will allow a company to send the appropriate electronic documentation in advance of a product’s arrival at the border, so that the paperwork can be processed ahead of time. It also includes specific rules for the expedited handling of express shipments.
The U.S. A&D industry is successful thanks to American innovation, a talented workforce, and access to international markets and supply chains, including those in Canada and Mexico. The USMCA provides an opportunity to reduce uncertainty caused by potential disruptions in trade and supports the continued growth of our trade relationships with two of our closest neighbors. We urge Congress and the Administration to work together to pass the USMCA.