US-Mexico-Canada Trade Agreement

382 Pages·2017·7.75 MB·English

United States
International Trade Commission
U.S.-Mexico-Canada Trade
Agreement: Likely Impact
on the U.S. Economy and
on Specific Industry
Sectors
(with Errata)
April 2019
Publication Number: 4889
Investigation Number: TPA 105-003
Commissioners
David S. Johanson, Chairman
Irving A. Williamson
Meredith M. Broadbent
Rhonda K. Schmidtlein
Jason E. Kearns
Catherine DeFilippo
Director, Office of Operations
William Powers
Director, Office of Economics
Jonathan Coleman
Director, Office of Industries
Address all communications to
Secretary to the Commission
United States International Trade Commission
Washington, DC 20436
U.S.-Mexico-Canada Trade
Agreement: Likely Impact
on the U.S. Economy and
on Specific Industry
Sectors
April 2019
Publication Number: 4889
Investigation Number: TPA 105-003
This report was prepared principally by
Co-Project Leaders
Serge Shikher, [email protected] and Mihir Torsekar, [email protected]
Deputy Project Leader Modeling Coordinator
Mitchell Semanik, [email protected] Peter Herman, [email protected]
Office of Industries
Lesley Ahmed, Renée Berry, Pedro Cardenas, Robert Casanova, Arthur Chambers, David Coffin (chapter
3 lead), Brian Daigle, Eric Forden, Diana Friedman, John Giamalva (chapter 5 lead), Brad Gehrke, Natalie
Hanson, Robert Ireland, Tamar Khachaturian, Amanda Lawrence, Katherine Linton, Angélica Marrero-
Sánchez, Daniel Matthews (chapter 4 lead), Elizabeth Nesbitt, Sabina Neumann, Erick Oh, Sarah Oliver,
Joann Peterson, Jennifer Powell (chapter 6 lead), Jessica Pugliese, George Serletis (chapter 7 lead),
Allison Thompson, Karl Tsuji, John VerWey, and Isaac Wohl
Office of Economics
Saad Ahmad, Tamara Gurevich, Alexander Hammer, Ross Hallren, Lin Jones, Caroline Peters,
Wen Jin Yuan, Marinos Tsigas, and Heather Wickramarachi
Office of Analysis and Research
Russell Duncan, David Lundy, and Laura Thayn
Office of the General Counsel
Andrea Casson, William Gearhart, and Brian Soiset
Office of Tariff Affairs and Trade Agreements
Arun Butcher and Donnette Rimmer
Content Reviewers
Andrew David and Alexander Hammer (chapters 8 and 9 lead)
Statistical Reviewer
Jeremy Wise
Editorial Reviewers
Judy Edelhoff and Peg Hausman
Administrative Support
Byron Barlow, Trina Chambers, Hau Nguyen, and Monica Sanders
Under the Direction of
David Riker, Chief, Research Division, Office of Economics
James Stamps, Chief, Advanced Technology and Machinery Division, Office of Industries
ERRATA
For the United States International Trade Commission, U.S.-Mexico-Canada Trade Agreement: Likely
Impact on the U.S. Economy and on Specific Industry Sectors, investigation no. TPA 105–003, USITC
Publication 4889, April 2019.
• In the Executive Summary, on page 17, in table ES.3, import percentages have been corrected for
agriculture, manufacturing and mining, and services to 1.8, 1.3, and 5.4 percent, respectively.
• In Chapter 2, on page 45, in table 2.4 the total U.S. imports from the world for agriculture,
manufacturing and mining and services have been changed to 1.8, 1.3, and 5.4 percent,
respectively.
• In Chapter 3, on page 81, in table 3.6, the sum of all labor value content calculations have been
corrected; hypothetical figures were removed in the “Expenditure” column for “Total,” “Engine,
transmission, or battery assembly,” and “R&D and IT costs.” In the “LVC calculation” column, the
percent for “Engine, transmission, or battery assembly” was changed from 10 percent to 5 percent
and the percent for “R&D and IT costs” was changed from 5 percent to 10 percent.
• In Chapter 4, on page 95, in table 4.1, crude petroleum is now reported and the “all other energy”
numbers have been changed accordingly. On page 109, the sentence which previously
corresponded to footnote 227 has been deleted, as has the text in the footnote. On page 110, text
has been deleted from footnote 233. In table 4.3 on page 111, the following changes have been
made:
Cotton and manmade fiber apparel – currently 80.00, change to 88.33
o
Wool apparel – currently 5.07, change to 5.33
o
Cotton and manmade fiber fabrics and made-ups – currently 65.00, change to 71.77
o
Cotton and manmade fiber yarn – currently 10.70, change to 11.81
o
Table note c has been revised.
o
• In chapter 5, on page 118, in table 5.1, U.S. imports of alcoholic beverages from ROW has been
corrected; on page 119, in table 5.2 has clarified that USMCA language on dairy TRQs is new in the
agreement; on page 123, the values reported for infant formula, cheese, whey products, and
yogurt have been corrected; on page 131, U.S. exports of alcoholic beverages to Canada has been
corrected; on page 134, the application of dispute settlement to SPS provisions has been corrected;
• In chapter 6, on page 148, in table 6.3, the second row on “retransmission of programming” has
been removed.
• In Chapter 9, on page 250, in table 9.10, clarifying language regarding the three types of prohibited
non-commercial assistance has been added to the third row of the “USMCA provision” column;
clarifying language regarding injury to domestic industry was added to the forth row of the same
table; on page 264, in table 9.20, a new row was added regarding “additional transparency.” This is
now reported in the third row of the table.
• In Appendix E, on page 315, in table E.4, total U.S. imports from the world reported for agriculture,
manufacturing and mining, and services have been corrected for each of the four columns.
• In Appendix F, on pages 327–28, in table F.5, total U.S. imports from the world that are reported
for agriculture, manufacturing and mining, and services have been changed for each of the three
columns. On page 330, table F.7, the total U.S. imports from the world for agriculture,
manufacturing and mining, and services have been corrected for each of the three columns.
May 21, 2019

Table of Contents
Table of Contents
Abbreviations and Acronyms .............................................................................. 9
Executive Summary .......................................................................................... 13
Overview of Assessment ........................................................................................................... 15
Economy-wide Assessment .................................................................................................. 15
Broad Sector Assessments .................................................................................................... 16
Overview of the Agreement ..................................................................................................... 17
Industry-specific Provisions of USMCA ..................................................................................... 18
Manufactured Goods and Energy Products .......................................................................... 18
Services ................................................................................................................................. 21
Agricultural Goods ................................................................................................................ 22
Assessment of Crosscutting Provisions..................................................................................... 23
International Data Transfers and E-commerce..................................................................... 23
Investment ............................................................................................................................ 24
Labor ..................................................................................................................................... 25
Intellectual Property Rights .................................................................................................. 25
Chapter 1 Introduction ................................................................................... 27
Purpose ..................................................................................................................................... 27
Scope of Analysis ...................................................................................................................... 27
USMCA Agreement Overview ................................................................................................... 28
Analytical Approach .................................................................................................................. 29
Organization of the Report ....................................................................................................... 30
USMCA Regional Economic Overview ...................................................................................... 30
Gross Domestic Product ........................................................................................................ 30
Trade in Goods and Services ................................................................................................. 32
Bibliography .............................................................................................................................. 35
Chapter 2 Economy-wide and Broad Sectoral Effects of Quantified
Provisions ....................................................................................................... 37
Introduction .............................................................................................................................. 37
Modeling Coverage ................................................................................................................... 38
Extensions to the Commission’s Modeling ............................................................................... 41
Estimated Economy-wide Impact of the USMCA ..................................................................... 43
Aggregate Effects of USMCA ................................................................................................. 43
Effects of USMCA on Different Types of U.S. Workers ......................................................... 45
Analytical Framework for the Economy-wide Analysis ............................................................ 50
Provisions Altering Current Policies or Standards ................................................................ 50
Provisions That Reduce Policy Uncertainty for International Data Transfer, Cross-
border Services, and Investment .......................................................................................... 52
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U.S.-Mexico-Canada Trade Agreement
Economy-wide Model ........................................................................................................... 58
Modeling of Labor ................................................................................................................. 60
Review of Related Literature .................................................................................................... 62
Bibliography .............................................................................................................................. 64
Chapter 3 Automotive, Steel, and Aluminum Products ................................... 69
Overview ................................................................................................................................... 69
Automotive Industry Overview ................................................................................................. 69
U.S. Automotive Trade with Mexico and Canada ..................................................................... 72
Summary of Key Automotive, Steel, and Aluminum Provisions ............................................... 74
Labor Value Content (LVC) .................................................................................................... 79
Rules of Origin for Steel and Aluminum Purchases .............................................................. 81
Impact of USMCA on U.S. Automotive and Related Sectors .................................................... 81
Quantifying Industry-level Effects ............................................................................................ 83
Estimated Effects Based on the Model ..................................................................................... 85
Literature Review ...................................................................................................................... 88
Bibliography .............................................................................................................................. 90
Chapter 4 Other Manufactured Goods and Natural Resources and Energy
Products ....................................................................................................... 93
Overview ................................................................................................................................... 93
U.S. Manufactured Goods, Natural Resources, and Energy Trade with Canada and Mexico .. 94
Summary of Key Provisions ...................................................................................................... 95
Industry-specific Discussion ...................................................................................................... 98
Chemical and Pharmaceutical Products ............................................................................... 98
Electronic Products ............................................................................................................. 100
Energy Products .................................................................................................................. 105
Textiles and Apparel............................................................................................................ 108
Bibliography ............................................................................................................................ 113
Chapter 5 Agricultural Products .................................................................... 117
Overview ................................................................................................................................. 117
U.S. Trade with Canada and Mexico ....................................................................................... 118
Summary of Key Provisions .................................................................................................... 118
Impact on Specific Sectors ...................................................................................................... 120
Dairy Products ..................................................................................................................... 121
Poultry, Egg, and Egg-Containing Products ......................................................................... 126
Sugar and Sugar-containing Products ................................................................................. 129
Alcoholic Beverages ............................................................................................................ 130
Wheat .................................................................................................................................. 131
Sanitary and Phytosanitary (SPS) Provisions....................................................................... 132
Biotechnology ..................................................................................................................... 134
Literature Review .................................................................................................................... 135
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Table of Contents
Bibliography ............................................................................................................................ 137
Chapter 6 Services ........................................................................................ 141
Overview ................................................................................................................................. 141
U.S. Trade with Canada and Mexico ....................................................................................... 143
Summary of Key Provisions .................................................................................................... 147
Market Access Provisions .................................................................................................... 148
Annex I and II Nonconforming Measures ........................................................................... 150
Other Key Provisions on Cross-border Trade in Services.................................................... 152
Impact on Specific Sectors ...................................................................................................... 153
Audiovisual Services ............................................................................................................ 155
Financial Services ................................................................................................................ 158
Professional Services ........................................................................................................... 160
Transportation Services (Land/Rail/Maritime) ................................................................... 162
Bibliography ............................................................................................................................ 167
Chapter 7 Digital Trade and E-commerce ...................................................... 171
Overview ................................................................................................................................. 171
Description of Selected Digital Industries ............................................................................... 172
Summary of Key Provisions .................................................................................................... 172
Impact on U.S. Economic Sectors: Analysis of Data Measures ............................................... 175
Impact of USMCA Provisions for Selected Digital Industry Sectors ....................................... 179
Computer Services .............................................................................................................. 179
Telecommunications ........................................................................................................... 180
Business-to-Consumer E-commerce ................................................................................... 182
Estimating the Effects of Higher De Minimis Thresholds ................................................... 184
Electronic Payment Services ............................................................................................... 185
Express/Postal Services ....................................................................................................... 186
Bibliography ............................................................................................................................ 188
Chapter 8 Crosscutting Provisions: Investor-State Dispute Settlement,
Intellectual Property Rights, and Labor ........................................................... 193
Overview ................................................................................................................................. 193
Investor-State Dispute Settlement Mechanism ..................................................................... 193
Assessment of Changes in Key ISDS Provisions .................................................................. 194
Modeling of Changes to Key ISDS Provisions ...................................................................... 199
Intellectual Property Rights .................................................................................................... 203
Changes to Key IPR Provisions ............................................................................................ 204
Assessment of Changes to Key IPR Provisions .................................................................... 207
Modeling of Changes to Key IPR Provisions ........................................................................ 213
Labor ....................................................................................................................................... 214
Assessment of Changes to Key Labor Provisions ................................................................ 218
Modeling of Labor Provisions: Collective Bargaining in Mexico ......................................... 221
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U.S.-Mexico-Canada Trade Agreement
Bibliography ............................................................................................................................ 223
Chapter 9 Other Crosscutting Provisions ....................................................... 233
Overview ................................................................................................................................. 233
Rules of Origin Provisions (Chapter 4) .................................................................................... 233
Origin Procedures Provisions (Chapter 5) ............................................................................... 235
Customs and Trade Facilitations Provisions (Chapter 7) ........................................................ 236
Trade Remedies (Chapter 10) ................................................................................................. 239
Technical Barriers to Trade Provisions (Chapter 11) .............................................................. 241
Government Procurement Provisions (Chapter 13) ............................................................... 243
Temporary Entry Provisions (Chapter 16) .............................................................................. 245
Competition Policy Provisions (Chapter 21) ........................................................................... 247
State-owned Enterprises and Designated Monopolies Provisions (Chapter 22) ................... 249
Environmental Provisions (Chapter 24) .................................................................................. 251
Small and Medium-sized Enterprises Provisions (Chapter 25) ............................................... 253
Competitiveness (Chapter 26) ................................................................................................ 254
Anticorruption Provisions (Chapter 27) .................................................................................. 255
Good Regulatory Provisions (Chapter 28) .............................................................................. 256
Publication and Administration Provisions (Chapter 29) ....................................................... 258
Administrative and Institutional Provisions (Chapter 30) ...................................................... 259
Dispute Settlement Provisions (Chapter 31) .......................................................................... 259
Exceptions and General Provisions (Chapter 32) ................................................................... 262
Macroeconomic Policies and Exchange Rate Matters (Chapter 33) ...................................... 263
Final Provisions (Chapter 34) .................................................................................................. 265
Bibliography ............................................................................................................................ 267
Appendix A Request Letter ............................................................................. 271
Appendix B Federal Register Notices .............................................................. 273
Appendix C Calendar of Hearing Witnesses .................................................... 279
Appendix D Summary of Views of Interested Parties ...................................... 287
Appendix E Economy-wide Model .................................................................. 307
Appendix F Modeling of Labor Provisions ...................................................... 321
Appendix G Automotive Rules of Origin Model .............................................. 335
Appendix H Gravity Modeling of International Data Transfer, Cross-border
Services, and IPR Provisions ............................................................................ 343
Appendix I Modeling of E-commerce ............................................................. 357
Appendix J Modeling Investment .................................................................. 365
Boxes
Box 3.1 Engine and Transmission Production, Trade, and Consumption ................................................... 73
Box 5.1 Operation of Tariff-Rate Quotas (TRQs) ...................................................................................... 126
Box 5.2 1997 Sugar and Sugar-containing Products Letter of Agreement ............................................... 129
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