Home > Uncategorized > Trade games are back: The USITC report on the new NAFTA

Trade games are back: The USITC report on the new NAFTA

from Dean Baker

U.S. trade policy is truly fascinating. Probably more than in any other area of public policy, trade agreements are structured by corporate interests behind closed doors. Then when a deal is produced, the establishment media and economists insist that we have to support the deal behind the important principle of “free trade.” The opponents are treated as knuckle-dragging Neanderthals who just can’t understand how the economy works.

We got another episode in this long-running show last week when the United States International Trade Commission (USITC) came out with its assessment of the United States, Mexico, Canada Agreement (USMCA), also known as the new NAFTA. It came as a surprise to virtually no one that the USITC study showed economic gains from the deal. The study projected that the deal would lead to an increase in GDP of 0.35 percent when its effects are fully felt. However, the real impressive part of the story is how it got this result.

Before getting to the particulars, it’s worth putting some perspective on the character of the report. The USITC was obviously determined to make the USMCA look good. One reason this is clear is the failure to put a date for the year for which their projections are made. The model that the USITC used to project gains, the model from the Global Trade Analysis Project (GTAP), assumes a long period through which the economy gradually adjusts to the changes put in place from a trade deal. The projected impact refers to the end year, which is around 16 years in the future.[1]

Incredibly, the UISTC study projecting the impact of USMCA neglects to mention the end year for its projections, which presumably would be something like 2034. The end year is presumably left out because a gain of 0.35 percentage points of GDP over sixteen years looks rather pathetic. It comes to just over 0.02 percentage points a year, an increment that would be essentially invisible.

  1. April 26, 2019 at 8:28 pm

    So at least no harm done? Can you suggest USMCA terms more beneficial to each of the three economies?

  2. lobdillj
    April 27, 2019 at 12:24 pm

    No harm done? That’s insane.

  3. April 28, 2019 at 6:32 pm

    Apologies in the off-topic comment, but you may be interested to know that Dean Baker is in the news (sort of in a “caught in the crossfire” sense).


    “t’s unclear who decided which experts would testify before the Rules Committee. Staffers on the Rules Committee say no one in leadership directly told them this person or that person couldn’t testify, but sources involved with the planning of the hearing say three criteria were applied to potential witnesses: (1) Is this person a leader of a single-payer group? If so, that person could not testify ― meaning Gaffney was out. (2) Is this person an activist? If so, they couldn’t testify. That meant people like Dr. Sanjeev Sriram, who has repeatedly advocated for Medicare for All, were ruled out. And (3) Has this person said anything negative about the Affordable Care Act?

    That last requirement, implemented by House Speaker Nancy Pelosi’s top health care staffer, Wendell Primus, according to sources, is particularly an issue for some single-payer advocates…”

    So, assuming this isn’t an identity mix-up, first of all congratulations on being on a team gathering information on how to fix something important to all of us, and second, know that this committee meeting might be in line with RWER’s mission – broadening the perspective of orthodox players. Best wishes.

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