NAFTA to USMCA: What is Gained?

35 Pages Posted: 25 Apr 2019

See all articles by Mary E. Burfisher

Mary E. Burfisher

affiliation not provided to SSRN

Frederic J. Lambert

International Monetary Fund (IMF)

Troy Matheson

Government of New Zealand - Department of Economics

Date Written: March 2019

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.

Keywords: Economic integration, Trade policy, Patterns of trade, Merchandise trade, Bilateral trade, NAFTA, USMCA, LVC, RVC, U.S. tariff, welfare gain, tariff

JEL Classification: F13, F14, F15, E01, F1, H27

Suggested Citation

Burfisher, Mary E. and Lambert, Frederic J. and Matheson, Troy, NAFTA to USMCA: What is Gained? (March 2019). Available at SSRN: https://ssrn.com/abstract=3377474 or http://dx.doi.org/10.2139/ssrn.3377474

Mary E. Burfisher (Contact Author)

affiliation not provided to SSRN

Frederic J. Lambert

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Troy Matheson

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

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