Comments to the U.S. International Trade Commission Regarding the United States-Mexico-Canada Agreement

Nigel Cory Stephen Ezell December 17, 2018
December 17, 2018

The North American Free Trade Agreement (NAFTA) has proven instrumental in deepening trade and investment linkages among North American nations, and its successor, the United States-Mexico-Canada Agreement (USMCA) is well-positioned to continue to facilitate robust North American trade and integrated production networks going forward. Since its entry into force in 1994, NAFTA has played a pivotal role in deepening and integrating North American economies, with the value of annual trade quadrupling since then to over $1.3 trillion annually today. Free exchange with North American trade partners has also significantly increased cross-border investment, with U.S. investment in Mexico growing ten-fold to over $100 billion annually. Canada and Mexico are America’s top two trading partners and consume 34 percent of America’s exports. In fact, 43 U.S. states exported at least $1 billion in goods to those countries last year. 14 million U.S. jobs depend on trade with Canada and Mexico, and in 17 states trade with those two nations accounts for at least 100,000 jobs. Similarly, trade with the United States supports 10 million Mexican jobs and 2 million Canadian ones.

While NAFTA represented a cutting-edge trade agreement back in 1994, the USMCA takes a number of important steps in updating the original agreement to reflect the realities of modern trade, including introducing new disciplines governing digital trade and upgrading intellectual property (IP) provisions. Furthermore, USMCA looks beyond North America in creating new, high-standard disciplines confronting what ITIF labels “innovation mercantilism,” which refers to trade practices often used by countries employing forms of state-led capitalism, such as currency manipulation or support for state-owned enterprises (SOEs), that enables these countries and their enterprises to compete in global marketplaces on non-market-based terms. The following submission provides a detailed assessment of some of USMCA’s key outcomes.