Editor's note: This story was updated after initial publication to include a response from the ITC.
The U.S. International Trade Commission is planning to submit to Congress its report on the likely economic impacts of the U.S.-Mexico-Canada Agreement on Thursday, sources tell Inside U.S. Trade.
The report, which is required under the 2015 Trade Promotion Authority law, will assess the likely impact of the deal on the U.S. economy “as a whole and on specific industry sectors, including the impact the agreement will have on the gross domestic product, exports and imports, aggregate employment and employment opportunities, the production, employment, and competitive position of industries likely to be significantly affected by the agreement, and the interests of United States consumers,” the law states.
The ITC has until Friday to submit the report to Capitol Hill and to the Office of the U.S. Trade Representative. In a statement to Inside U.S. Trade, an ITC spokeswoman said she could offer “no more specific information to provide other than what we already have (which is that the Commission will submit its report to the President and the Congress and release it to the public no later than 105 days after the President entered into the Agreement, plus 35 additional days due to the government shutdown).”
John Murphy, senior vice president for international policy with the U.S. Chamber of Commerce, said this week that the analysis was “no easy task” and “may be harder than it was with past trade agreements.”
“One overriding question is: What’s the baseline?” Murphy asked in an April 16 blog post. “Unlike new trade agreements reached over the past two decades with countries from Chile and Singapore to South Korea and Colombia, the USMCA is a successor to the 25-year old North American Free Trade Agreement (NAFTA), which eliminated all Mexican tariffs on U.S. exports. With regard to Canada, the NAFTA and its predecessor, the U.S.-Canada Free Trade Agreement, eliminated Canadian tariffs on approximately 99% of all U.S. exports.”
While the economic effects of tariff elimination have been focal points of past ITC reports, he added, in this case “there just aren’t many tariffs left to cut.”
“Historically, the economic effects of tariff elimination have been central to these ITC reports. In this case, the USMCA eliminates some remaining Canadian barriers facing U.S. dairy and poultry exports, but the bottom line is that there just aren’t many tariffs left to cut,” he wrote.
Murphy urged lawmakers planning to use the ITC report to inform their opinions of the deal to “look at the big picture,” touting “Liberalized trade with Canada and Mexico” that “has been tremendously important to the U.S. economy.”
Last week several lawmakers told Inside U.S. Trade that the report likely would not predict significant economic growth spurring from USMCA. And last month, a private-sector source said a likely low-to-negative GDP finding in the report could provide another reason for lawmakers not to support the deal.
“It could be a negative number,” the source said, citing the ITC's 2016 report on the Trans-Pacific Partnership, which predicted a GDP boost of just 0.15 percent if the deal were to enter into force.
Murphy also said the ITC faced challenges in calculating many of the deal’s benefits included in the “modernized ‘rules’ chapters addressing issues ranging from the digital economy and intellectual property protection to sanitary and phytosanitary rules for agricultural trade.”
“For example, the USMCA includes strong rules blocking ‘behind the border’ barriers against U.S. exports. All too often, foreign governments deploy regulations or standards in an arbitrary way to block imports. The USMCA prohibits this kind of protectionism in disguise,” he added. “How do economic models take these state-of-the-art rules? This is part of the ITC’s unenviable task. But the business community knows their benefits are very substantial.”
Public Citizen’s Global Trade Watch last week said it was looking forward to evaluating the ITC’s analysis.
“What does the ITC think is a real change that merits inclusion in its modeling?” the group asked in an April 12 blog post.
Citing new labor and environmental provisions, “the impact of the major rollback” of the investor-state dispute settlement mechanism, the inclusion of a new labor value content rule, stronger rules of origin, and more, the group questioned what the ITC might consider “‘economically important’ enough to model.”
Additionally, the group asked whether the Commission would “continue to exclude from its core model chapters like those on intellectual property, even though the impact on consumers of locking in high medicine prices through longer patent monopolies should be weighed against other consumer welfare calculations?”
And on tariff elimination, Public Citizen wrote: “With tariffs largely eliminated by the original NAFTA, how much of the economic gains from the revised NAFTA arise from cutting “non-tariff barriers”?”
“How the ITC handles these issues will be interesting to trade wonks. But the report is not likely to reveal much about either the pact’s probable effects or its prospect for congressional passage,” the post concluded.
