New Report Outlines Case for USMCA Ratification While Cautioning Against NAFTA Termination
Highlights Positive Economic Impact for United States, Urges Quick USMCA Passage
A new report from the American Council for Capital Formation warns that termination of the North American Free Trade Agreement (NAFTA) would be a “big mistake”, concluding that the trade agreement has had an overall positive impact on the U.S. economy as well as the North American economy. Given the tremendous economic gains and their longstanding free trade relationship, the report concludes that the United States, Mexico and Canada should ratify the modernized U.S.-Mexico-Canada Agreement (USMCA) to bring it into the 21st century.
“Over the last twenty-five years, NAFTA has had a profound impact, changing the North American economy by creating integrated supply chains and increasing productivity and economic activity in the region. Both in terms of output and employment, the agreement has been a net positive for the United States, Canada, and Mexico,” ACCF’s Senior Vice President and Chief Economist Dr. Pinar Çebi Wilber, the report’s author, said. “U.S. businesses are operating in an increasingly competitive global marketplace and terminating NAFTA would put them at a huge disadvantage, in addition to the significant job and GDP loss the nation would experience. Congress should take note of the long and successful trade relationship between the three nations and act quickly to approve the USMCA.”
NAFTA/USMCA: Past, Present and Future details the history of NAFTA and examines the economic facts, studies, and data in order to evaluate the agreement’s importance for both the U.S. and its North American trading partners:
• Overall trade in goods and services between U.S. and its NAFTA trading partners almost quadrupled, from $337 billion in 1993 to $1.3 trillion in 2017.
• The top two destinations for U.S. goods exports were Canada and Mexico, accounting for 34 percent of all U.S. exports of goods and services.
• Our two neighbors were also the second and third largest import source for the U.S., comprising 26 percent of total U.S. imports.
While President Trump has repeatedly threatened to terminate NAFTA, doing so would have a detrimental economic outcome for the U.S. according to the report:
• A recent study shows that under various scenarios, jobs losses could be between 1.8 to 3.6 million and Gross Domestic Product (GDP) losses could be between 0.6 to 1.2 percent.
Cautioning against NAFTA termination, Dr. Çebi Wilber takes a closer look at the USMCA’s potential impact on the U.S. economy:
• The report highlights the International Trade Commission’s (ITC) analysis which found that the agreement is expected to raise U.S. real GDP by over $68 billion and employment by 176,000 jobs.
In particular, the nation’s energy sector benefitted tremendously from NAFTA with both Mexico and Canada emerging as major buyers of petroleum. Additionally:
• NAFTA has driven integration of energy markets in North America and thanks to the shale revolution in the U.S., natural gas became a key component of energy trade with Mexico.
• The growth in natural gas fired electricity generation in Mexico—which lacks domestic natural gas production—has made the U.S. their largest foreign supplier of natural gas.