Dive Brief:
- The United States Mexico and Canada (USMCA) agreement would have a "moderate" overall impact on the U.S. economy, according to a report from the International Trade Commission (ITC) released Thursday.
- The report simulated effects of the deal and found it would raise U.S. GDP by $68.2 billion or 0.35% and create 176,000 jobs, which represents a 0.12% bump in total U.S. employment.
- The simulation addressed the following eight sectors: agriculture, automobiles, intellectual property rights (IPRs), e-commerce, labor, international data transfer, cross-border services and investment. It found imports to and exports from Canada and Mexico would modestly increase, with manufacturing seeing the largest bump in exports (3.3%).
Growth in U.S. trade under USMCA
| Exports (%) | Exports (billion $) | Imports (%) | Imports (billion $) | |
|---|---|---|---|---|
| U.S. trade with Canada | 5.9 | 19.1 | 4.8 | 19.1 |
| U.S. trade with Mexico | 6.7 | 14.2 | 3.8 | 12.4 |
Source: International Trade Commission
Dive Insight:
In addition to estimating the economic affect of the deal, the report is also a mandated part of the ratification process. The release of the report means the USMCA is one step closer to ratification.
But the moderate impact it describes is unlikely to change many stakeholder opinions — so the deal may have just as many enemies now as it did before the report's release.
The relative size of the U.S. economy compared to Mexico and Canada and "the reduction in tariff and nontariff barriers that has already taken place among the three countries under NAFTA" are the major contributing factors to this macro assessment, according to the report.
The manufactured goods segment described as a beneficiary of the deal includes the auto industry, which will be particularly impacted, according to the ITC.
"USMCA represents a significant increase in regional content required for duty-free treatment, and introduces a more complicated process for qualifying automotive, steel, and aluminum products for such treatment," reads the report, which estimates the sector will create 28,000 new jobs and a slight uptick in the price of passenger vehicles and light trucks.
Agricultural products is the other segment of the economy that may see some positive effect in the form of a small increase in dairy exports and a potentially large increase in poultry exports six years after the deal goes into effect.
The other segments within manufactured goods — including chemicals and pharmaceuticals, electronic products, energy products and textiles and apparel — would see little effect.
The Office of the United States Trade Representative also released a report Thursday predicting greater impact on the economy from the auto sector, claiming its report was based on actual plans submitted to the administration by automakers. This white paper predicts the changes to automotive content requirements would create 76,000 new automotive industry jobs in five years.
In response to the ITC report, U.S. Trade Representative Robert Lighthizer noted the predicted GDP growth rate under USMCA would be twice that projected under the Trans-Pacific Partnership.
"These findings validate President Trump’s action to withdraw from TPP and renegotiate the disastrous NAFTA. With USMCA, we will have stronger growth, more trade and more jobs — particularly in manufacturing. There can be no doubt that the USMCA is a big win for America’s economy," he said in a statement emailed to Supply Chain Dive.
