IMF analysis of USMCA versus NAFTA
The International Monetary Fund (IMF) published a paper, NAFTA to USMCA: What is Gained? The IMF is an international organization comprised of 189 member-countries whose purpose is to ensure global economic and financial stability. The new working paper examines the effects of the United States-Mexico-Canada Agreement (USMCA) compared to its predecessor, the North American Free Trade Agreement (NAFTA).
The IMF conducted an objective analytical assessment of key provisions of the updated agreement, particularly focusing on agriculture, automobile rules of origin, textiles and apparel, and other trade-facilitating measures and determined their effects on real gross domestic production (GDP) and welfare (the overall well-being of the economy).
Regarding agriculture, the paper noted that the USMCA Sanitary and Phytosanitary (SPS) Chapter enhanced existing obligations under the World Trade Organization (WTO) and NAFTA, particularly those obligations related to science and risk analysis, audits, import checks, and regionalization–all of which can form the basis for common non-tariff trade barriers. For grain, the USMCA eliminates the need for country of origin statements on certificates. Also noted, the USMCA expanded U.S. market access in Canada for dairy (including poultry and eggs) by more than 3%, while the United States expanded Canada’s access for dairy, sugar, cotton and peanuts. Border-check improvements and modernization were one of the greatest benefits of the updated agreement, according to the paper.
Overall, however, the analysis noted that outcomes from the new agreement were mixed. The apparel, automotive and textile sectors were negatively affected; change to real GDP was mostly neutral; and overall economic welfare improved with the caveat that U.S. steel and aluminum tariffs would be lifted, along with Canada and Mexico’s reciprocal surtaxes. Moreover, the aggregate trilateral welfare gains are due to gains by Canada and Mexico, which stand to gain $700m and $600m, respectively. In contrast, the United States stands to lose $700m in overall economic welfare, mostly due to tighter rules of origin for vehicles and textiles.
The full IMF analysis can be found here.
Author Daniella Taveau is Principal with Bold Text Strategies. She is a former International Policy Analyst with the U.S. Food and Drug Administration, and a Trade Negotiator with the U.S. Environmental Protection Agency, where she represented the United States in the World Trade Organization SPS and TBT Committees, and in U.S. free trade agreements.