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NAFTA to USMCA: What is Gained?

Author

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  • Mary E. Burfisher
  • Frederic Lambert
  • Mr. Troy D Matheson

Abstract

The United States – Mexico – Canada Agreement (USMCA) was signed on November 30, 2018 and aims to replace and modernize the North-American Free Trade Agreement (NAFTA). This paper uses a global, multisector, computable-general-equilibrium model to provide an analytical assessment of five key provisions in the new agreement, including tighter rules of origin in the automotive, textiles and apparel sectors, more liberalized agricultural trade, and other trade facilitation measures. The results show that together these provisions would adversely affect trade in the automotive, textiles and apparel sectors, while generating modest aggregate gains in terms of welfare, mostly driven by improved goods market access, with a negligible effect on real GDP. The welfare benefits from USMCA would be greatly enhanced with the elimination of U.S. tariffs on steel and aluminum imports from Canada and Mexico and the elimination of the Canadian and Mexican import surtaxes imposed after the U.S. tariffs were put in place.

Suggested Citation

  • Mary E. Burfisher & Frederic Lambert & Mr. Troy D Matheson, 2019. "NAFTA to USMCA: What is Gained?," IMF Working Papers 2019/073, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/073
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    References listed on IDEAS

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    1. José Anson & Olivier Cadot & Antoni Estevadeordal & Jaime de Melo & Akiko Suwa‐Eisenmann & Bolormaa Tumurchudur, 2005. "Rules of Origin in North–South Preferential Trading Arrangements with an Application to NAFTA," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 501-517, August.
    2. Lionel Fontagné & Cristina Mitaritonna & José E. Signoret, 2016. "Estimated Tariff Equivalents of Services NTMs," Working Papers 2016-20, CEPII research center.
    3. Russell Hillberry & Xiaohui Zhang, 2018. "Policy and performance in customs: Evaluating the trade facilitation agreement," Review of International Economics, Wiley Blackwell, vol. 26(2), pages 438-480, May.
    4. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    5. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
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    Cited by:

    1. Yan, Meng & Chen, Jian & Song, Victor & Xu, Ke, 2022. "Trade friction and price discovery in the USD–CAD spot and forward markets," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    2. Hosoe, Nobuhiro, 2022. "Economic de-integration in North America and foreign direct investment from Japan," Japan and the World Economy, Elsevier, vol. 61(C).
    3. Christoph Scherrer & Emilie Segura, 2019. "Trumps neues Handelsabkommen mit Mexiko: Besserer Schutz für Arbeiter*innen?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 195, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    4. Jon Johnson, 2019. "Bumper to Bumper: Will the CUSMA Rules of Origin Make America’s Auto Industry Great Again?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 547, July.
    5. Ciuriak, Dan & Dadkhah, Ali & Xiao, Charles, 2019. "Quantifying the USMCA," Conference papers 333073, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Raul Arango Miranda & Robert Hausler & Rabindranarth Romero Lopez & Mathias Glaus & Jose Ramon Pasillas-Diaz, 2020. "Testing the Environmental Kuznets Curve Hypothesis in North America’s Free Trade Agreement (NAFTA) Countries," Energies, MDPI, vol. 13(12), pages 1-13, June.
    7. Uner, Firat & OĞULTÜRK, Assoc. Prof. Dr.M. Cem, 2024. "Nafta: More Than A Regıonal Trade Agreement," MPRA Paper 120039, University Library of Munich, Germany, revised 19 Jan 2024.
    8. Gabriel Mhonyera & Daniel Francois Meyer, 2023. "The Impact of AfCFTA on Welfare and Trade: Nigeria and South Africa in Light of Core Export Competences," Sustainability, MDPI, vol. 15(6), pages 1-16, March.

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