BUDGET DIGEST: The United States-Mexico-Canada Agreement

Budget Digest: The United States-Mexico-Canada Agreement

Last week, President Trump signed into law the United States-Mexico-Canada Agreement (USMCA) which modernizes the decades-old North American Free Trade Agreement (NAFTA). The USMCA is vital for American workers, farmers, manufacturers, and innovators and continues the trend of pro-growth policies by creating jobs and driving the economy.

Why the USMCA is a Win for Americans. The USMCA will benefit Americans and the economy by replacing an outdated NAFTA with a more enforceable agreement that promotes pro-growth policies and restores economic certainty. According to the U.S. International Trade Commission, the USMCA is expected to create 176,000 jobs and grow U.S. gross domestic product by $68 billion over six years after the agreement is fully implemented.[1] In addition to adding more jobs and boosting economic growth, the Congressional Budget Office (CBO) estimated that the USMCA will result in a net decrease in the deficit of $3 billion over 10 years.[2] This is encouraging news, as last week’s House Budget Committee hearing with CBO Director Phillip Swagel confirmed that projected deficits and debts are unstainable. A few notable provisions of the agreement include:

  • Advancing Digital Trade and Protecting Intellectual Property. The agreement includes a new digital trade chapter that will benefit the millions of Americans whose jobs are supported by the internet.[3] Moreover, the agreement strengthens protections for intellectual property in areas such as trademarks, copyrights, trade secrets, and patents. These provisions will promote growth, innovation, and competition.
  • Supporting American Farmers and Ranchers. The USMCA expands and enhances U.S. trade relations with Canada and Mexico, which serve as two of the largest export markets for U.S. food and agricultural products, totaling $39 billion in exports in 2017.[4] Additionally, all U.S. products that enjoyed zero-tariff treatment under NAFTA will continue at that level.[5]
  • Encouraging Small Businesses. More than 120,000 small- and medium-sized businesses rely on trade with Canada and Mexico, with exports of goods to these countries totaling $51 billion and $76 billion in 2016, respectively. The USMCA includes business friendly provisions such as reducing paperwork for shipments under $2,500, and establishes the Committee on SME Issues dedicated to small businesses with officials from each country involved. Moreover, the provisions on digital trade and intellectual property also benefit small businesses.[6]

Once fully implemented, the 11 million Americans with jobs supported by trade with Canada and Mexico will begin to experience the benefits brought about by the USMCA.[7] Lawmakers should continue to work on a bipartisan basis to implement policies that bolster the growth of the economy and help put the federal budget on a fiscally sustainable path.

[1] https://www.usitc.gov/press_room/news_release/2019/er0418ll1087.htm.

[2] https://www.cbo.gov/system/files/2019-12/hr5430.pdf.

[3] https://internetassociation.org/blog/usmca-supercharging-digital-trade-for-american-businesses-and-workers/.

[4] https://www.fb.org/files/Trade-USMCA_nov.pdf.

[5] https://ustr.gov/sites/default/files/files/Press/fs/USMCA/USMCA-Agriculture.pdf.

[6] http://www.usmcacoalition.org/wp-content/uploads/2019/10/USMCA-Coalition-One-Pager-v2.pdf; https://ustr.gov/sites/default/files/files/Press/fs/USMCA/USMCA-SME.pdf.

[7] https://www.usmcacoalition.org/wp-content/uploads/2019/02/023607_INTL-USMCA-Coalition_Onepager_final.pdf.