Quantifying the USMCA

This study develops a quantitative analysis of the impact of the Canada-United States-Mexico Agreement (USMCA), as signed on 30 November 2018. The USMCA provides a major overhaul of the NAFTA legal text based largely on the Trans-Pacific Partnership, but only minor changes to market access. The modelling approach consists of developing impacts of the USMCA on the member countries as estimated using a dynamic global computable general equilibrium (CGE) model. The main modelling challenge is to quantify the policy shock, which is unusual in that it has no traditional tariff liberalization and has many features that promise to be restrictive of trade. The impact of the USMCA is assessed against a baseline that reflects an in-force NAFTA. These results can, however, be compared to the impacts of NAFTA lapsing to infer the difference between the USMCA and the hard NAFTA exit scenario. We evaluate non-tariff measures based on the extent to which the USMCA reduces/increases the parties’ scores on indexes measuring restrictiveness of their regimes for goods, services, and investment. For goods, we examine possible improvements upon the WTO Trade Facilitation Agreement (TFA) commitments for the North American economies as measured by the OECD’s Trade Facilitation Indicators (TFI). For services, we consider the liberalization implied by the services commitments evaluated on the basis of changes to the parties’ scores under the OECD’s Services Trade Restrictiveness Index (STRI). For investment, we consider the changes implied against the parties’ scores on the OECD’s Foreign Direct Investment Restrictiveness (FDIR) index. For services and investment, we consider the value of binding market access commitments.