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ITC report, “likely impact” of United States-Mexico-Canada Agreement (USMCA)

ITC report, “likely impact” of USMCA

The U.S. International Trade Commission (ITC) today released a report assessing the “likely impact” of the United States-Mexico-Canada Agreement (USMCA) signed in November 2018.

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The ITC’s report (requested by the U.S. Trade Representative and required by law) describes the impact of the agreement on the U.S. economy as a whole and on specific industry sectors and the interests of U.S. consumers.

The main findings are listed in today’s ITC release and reflect:

  • The elements of the agreement that would have the most significant effects on the U.S. economy are: (1) provisions that reduce policy uncertainty about digital trade; and (2) certain new rules of origin applicable to the automotive sector.
  • Of interest to stakeholders in many sectors, particularly services industries, are USMCA’s new international data transfer provisions including provisions that largely prohibit forced localization of computing facilities and restrictions on cross-border data flows. Industry representatives consider these provisions to be a crucial aspect of this agreement in terms of changing certain rules of trade across industry sectors, especially given the lack of similar provisions in the North American Free Trade Agreement (NAFTA).
  • Because NAFTA has already eliminated duties on most qualifying goods and significantly reduced nontariff measures, USMCA’s emphasis is on reducing remaining non-tariff measures on trade and the U.S. economy; addressing other issues that affect trade, such as workers’ rights; harmonizing regulations from country to country; and deterring certain potential future trade and investment barriers.
  • USMCA would strengthen and add complexity to the rules of origin requirements in the automotive sector by increasing regional value content (RVC) requirements and adding other requirements. USMCA’s requirements are estimated to increase U.S. production of automotive parts and employment in the sector, but also to lead to a small increase in the prices and small decrease in the consumption of vehicles in the United States. 
  • The agreement would establish commitments to open flows of data, which would positively impact a wide range of industries that rely on international data transfers.
  • USMCA would reduce the scope of the investor-state dispute settlement mechanism—a change that, based on modeling results, would reduce U.S. investment in Mexico and would lead to a small increase in U.S. domestic investment and output in the manufacturing and mining sectors.
  • The agreement, if enforced, would strengthen labor standards and rights, including those related to collective bargaining in Mexico, which would promote higher wages and better labor conditions in that country.
  • New intellectual property rights provisions would increase protections for U.S. firms that rely on intellectual property. These changes are estimated to increase U.S. trade in certain industries.

The Office of the U.S. Trade Representative today released a report that examines the estimated impact the USMCA will have on investment and jobs in the U.S. automotive sector. Read the USTR release.

 

For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
Partner and Global Practice Leader
T: 312-665-1022
E: dzuvich@kpmg.com

John L. McLoughlin
Principal and East Coast Leader
T: 267-256-2614
E: jlmcloughlin@kpmg.com

Andy Siciliano
Partner and National Practice Leader
T: 631-425-6057
E: asiciliano@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
T: 212-954-3094
E: labad@kpmg.com

Irina Vaysfeld
Principal
T: 212-872-2973
E: ivaysfeld@kpmg.com

Amie Ahanchian
Managing Director
T: 202-533-3247
E: aahanchian@kpmg.com

Robert Waldrop
Principal
T: 212-954-8117
E: rwaldrop@kpmg.com

Gisele Belotto
Managing Director
T: 305-913-2779
E: gbelotto@kpmg.com

Christopher Young
Principal
T: 312-665-3229
E: christopheryoung@kpmg.com

Andy Doornaert
Managing Director
T: 313-230-3080
E: adoornaert@kpmg.com

George Zaharatos
Principal
T: 404-222-3292
E: gzaharatos@kpmg.com

Jessica Libby
Managing Director
T: 612-305-5533
E: jlibby@kpmg.com

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