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“The USMCA would promote economic growth of North America in the coming years”: Díaz Bautista

By: Dr. Alejandro Díaz-Bautista, economist (PhD).

Trump’s next 5 months could reshape international trade in the coming years.

The positive economic effects in favor of economic growth in North America in case of approving the USMCA are not generally known despite the fact that we are talking about a tariff cut similar to reducing taxes on imports and exports.

“The USMCA would clearly foster economic growth of North America in the ’20s of the 21st century,” said Dr. Alejandro Díaz Bautista, economist, a national researcher at Conacyt as well as a research professor at El Colegio de la Frontera Norte (The Colef).

While President Donald Trump will have the following five months of deals and decisions that could shape his international commercial legacy and his chances of re-election to the presidency. The US House and Senate have not yet voted on Trump’s new trade agreement, the Agreement between the United States, Mexico and Canada (USMCA).

Talks between the administration and the Democrats about pending concerns will continue in August 2019. Potentially, this sets the stage for Congress to vote on the pact when it returns in September, or for Trump to revive plans to withdraw from the Free Trade Agreement of North America if the President of the House of Representatives, Nancy Pelosi, blocks the action on the USMCA.

President Trump will also boost trade talks with China, Japan, and the European Union. And all this could culminate in December with changes in the dispute settlement system of the World Trade Organization (WTO).

American trade with the rest of the world is quite important. However, about 45% of US trade occurs with three countries in approximately equal amounts: Canada, Mexico, and China.

It is estimated that the USMCA would increase annual exports from the United States to Canada by more than $19 billion and annual exports to Mexico by more than $14 billion, an increase of 5% and 10% above current levels.

The manufacturing sector would experience the highest percentage of profits in production, exports, wages and employment in the coming years, while, in absolute terms, services would experience the greatest benefits. In many ways, the USMCA is a roadmap for future free trade agreements in the world. The T-MEC or USMCA is the largest of the 17 regional free trade agreements that involve the United States.

While the Canadian ambassador to Mexico, Pierre Alarie, considered it very unlikely, in fact, almost impossible, for his country’s Parliament to approve the Mexico, United States and Canada Treaty (USMCA) before his legislative elections on October 21, although he noted that Prime Minister Justin Trudeau has the authority to convene a special meeting to be voted during the summer.

Considering the electoral campaign of President Donald Trump, it is foreseeable that Mexico, the United States and Canada Treaty (USMCA) will be approved in the United States from September to November. It is expected that the USMCA can take effect in 2020.

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