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Trump's Mexico-Canada deal would bring minimal economic gains, trade agency says

The U.S.-Mexico-Canada Agreement is likely to provide a slight boost to the American economy, the U.S. International Trade Commission said in an analysis of the Trump administration’s signature trade accomplishment.The new pact, which President Donald Trump has portrayed as a “truly groundbreaking achievement,” would raise U.S. GDP by $68.2 billion, or 0.35 percent, by the sixth year after it enters into force, the independent panel found. The USMCA would also create 176,000 U.S. jobs, increasing employment by 0.12 percent. The report’s forecast of a minimal increase in the GDP could make it more difficult for Trump to sell the deal to Democrats and labor groups, who have been pushing for a number of changes before the agreement gets a vote.Administration officials previously sought to minimize expectations because the ITC report was widely expected to be a marginal headline number. The ITC analysis shows that changes to NAFTA's automotive rules of origin, or rules governing how much of a car must be sourced from within North America in order to receive tariff-free treatment, would have some of the most significant effects on the U.S. economy of any aspect of the new pact.The new rules would lead to a net increase of 28,000 full-time U.S. jobs in the auto sector, the ITC found. The overall projections for the auto sector, however, are mixed: Stricter rules are estimated to slightly increase U.S. production of automotive parts and employment, but they will also cause a small increase in prices for consumers and a modest decrease in U.S. vehicle consumption. The new rules would also “draw resources away from other manufacturing sectors and the rest of the U.S. economy, driving up production costs from other sectors,” the ITC found. The ITC found that another part of the deal that will have a significant impact on the U.S. economy is new rules governing digital trade, which are expected to reduce uncertainty and boost e-commerce. Ron Wyden, the top Democrat on the Senate Finance Committee, said the report “confirms what has been clear since this deal was announced — Donald Trump’s NAFTA represents at best a minor update to NAFTA, which will offer only limited benefits to U.S. workers.”Business groups and other supporters of the deal have also said the focus should not only be on its economic impact, but on the importance of certainty and modernized standards.

 

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Politico