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Conflict Over the Potential Economic Impact of the USMCA

04/29/2019

The U.S. International Trade Commission has released a comprehensive report on the effects of the proposed United States Mexico and Canada Agreement (USMCA) negotiated to succeed NAFTA which has been in effect for 25 years.  The Commission estimates that the USMCA will increase Gross Domestic Product by 0.35 percent and generate 176,000 jobs.

 

In contrast, the White House Council Of Economic Advisors estimates an additional $34 billion in total investment in the U.S. auto industry and creation of an additional 76,000 jobs in the sector over a five-year period.

 

The agreement as negotiated but not yet ratified, increases wages for workers in Mexico reducing unfair competition to the U.S. and also mandates increased U.S. automobile content.  It is estimated that increases in production cost will passed to consumers and small automobiles will increase in price by close to two percent with a consequential reduction in sales.  Alternatives to compliance with new rules will result in increased tariffs which may well be borne by manufacturers.

 

It is hoped that the divergence between the parties in Congress will soon be resolved since ratification of USMCA is critical to the agricultural sector of our economy.  Rescission of Section 232 tariffs should be implemented concurrent with ratification of USMCA.