Quantifying the USMCA as Amended
Paper presented at the GTAP Annual Conference, Warsaw, 19-21 June 2019
50 Pages Posted: 26 Jun 2019 Last revised: 26 Oct 2020
Date Written: June 19, 2019
This study develops a quantitative analysis of the impact of the United States-Mexico-Canada Agreement (USMCA), originally signed on 30 November 2018, and amended by the Protocol of Amendment signed in Mexico City on 10 December 2019. The USMCA provides a major overhaul of the North American Free Trade Agreement (NAFTA) based largely on the Trans-Pacific Partnership (TPP) text. It introduces only minor changes to market access, intensifies trade and investment diversion, increases uncertainty by weakening the institutional framework of the NAFTA, and seeks to shift the net benefits of the NAFTA towards the United States.
The evaluation of the USMCA is developed using simulations on a computable general equilibrium (CGE) model, based on a dynamic specification of the Global Trade Analysis Project (GTAP) model, modified to directly represent goods and services trade conducted through foreign affiliates, as well as on a cross-border basis, and to reflect the impact of liberalization of FDI. The impact of the USMCA is assessed against a baseline that reflects an in-force NAFTA. These results are compared to the impacts of NAFTA lapsing to infer the difference between the USMCA and a “hard” NAFTA exit scenario.
Keywords: USMCA, CGE, uncertainty, rules of origin, value of bindings
JEL Classification: F02, F13, F15
Suggested Citation: Suggested Citation