The US International Trade Commission (USITC) released a report in the past week that sought to assess the impact of the United States-Mexico-Canada Agreement (USMCA) implemented by the Trump Administration in late November 2018.
According to the report, the elements of the agreement that would have the most significant effects on the US economy are provisions that reduce policy uncertainty about digital trade and new rules of origin in the automotive industry. USMCA’s rule of origin requirements are expected to increase US production of automotive parts and employment in the sector, but the report also notes the potential for a small increase in the prices and potential for reduced vehicle consumption in the US. T
he reduction of the USMCA’s investor-state dispute settlement (ISDS) mechanism is expected to reduce US investment in Mexico and increase US domestic investment and output in the manufacturing and mining industries. The protection of intellectual property rights is expected to increase US trade with both countries.
The agreement is expected to improve labor standards and rights including collective bargaining in Mexico. The US ITC analytical model estimates that the USMCA would increase employment by 176,000 jobs, or 0.12 percent, and raise GDP by $68.2 billion, or 0.35 percent. Both US exports to Canada and Mexico, as well as US imports from the two countries, are expected to increase under the new agreement. US imports and exports to Canada are expected to achieve an equal increase of $19.1 billion while exports to Mexico are estimated to increase $14.2 billion with US imports from Mexico increasing $12.4 billion.