Nearshore Americas
nearshore USMCA

USMCA Will Likely Boost Neashore Services Industry

The Nearshore services industry will likely get a shot in the arm, with the US, Mexico, and Canada agreeing on their revised free trade agreement, the USMCA.

The USMCA is free of ‘data localization’ rules, meaning technology companies can transfer and store digital information in any one of the signatory countries.

It also protects businesses from facing legal actions over the content their users post online, such as product reviews on e-commerce firms or job descriptions on LinkedIn.

With the agreement comprising of many legal safeguards against copyrights violations, more US tech firms may be tempted to expand operations to Mexico to capitalize on its low-cost digital workforce.

But the Mexican manufacturing industry, auto, and textile sectors, in particular, may not able to profit from their low-cost operations.  To avoid tariffs, automakers need to produce 75% of a vehicle’s parts in one of the three countries by paying workers at least US$16 an hour.

This is bad news for Asian and European automakers using Mexican factories to produce cars for American consumers.

Besides, the trade pact, set to replace the North American Free Trade Agreement (NAFTA), requires Mexico to reform its labor laws, freeing its workers to form unions and demand for a pay rise.

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The US and Canada can now set up panels of labor experts to investigate union complaints in Mexican factories and facilities.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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