President Donald Trump's new North American trade deal would have an almost imperceptible effect on the U.S. economy and give an even smaller bump to the labor market, according to an independent analysis by the International Trade Commission.
The commission said Thursday that the U.S.-Mexico-Canada agreement would lift the U.S. economy by 0.35 percent, or $68.2 billion, and add 176,000 jobs over six years after it takes effect. That's barely a ripple in a $21 trillion-a-year economy and a job market of almost 151 million people.
In a 379-page analysis, the commission said the agreement would "have a positive impact" and would increase auto production and employment, a key administration goal.
The assessment, which was delayed five weeks by the partial government shutdown, is required to be delivered to Congress before lawmakers hold an up-or-down vote on the U.S.-Mexico-Canada Agreement.
The new trade pact, signed by the three countries last year, is designed to encourage factories to move back to the United States. For instance, one provision says that in order for a car to qualify for duty-free treatment under the agreement, 40 percent of its content must be produced in North American factories where workers earn an average of at least $16 an hour -- that is, not Mexico.
The commission found that the new agreement would raise the price of U.S. cars modestly and reduce sales. It would create 30,000 jobs in American auto-parts plants but cost 1,500 jobs in factories that assemble cars.
Administration officials are pushing for quick congressional action, but most trade analysts expect the process to drag on for months. House Speaker Nancy Pelosi has said tougher enforcement measures need to be written into the deal to make sure that Mexico complies with promised labor changes.
An overhaul of the 25-year-old North American Free Trade Agreement, the new version is less sweeping than the broad elimination of virtually all trade barriers in the earlier accord, economists say.
NAFTA was expected to increase the size of the U.S. economy by just 0.5 percent and increase employment by less than 1 percent, according to the commission's 1993 study.
"Most trade deals don't have an outsized effect on growth over the long term," said David Page, senior economist for AXA Investment Managers in London. "It does tend to be a little bit peripheral."
The administration sought to pre-empt the report, releasing its own assessment that concluded the deal would create 76,000 new auto jobs over the next five years, and trigger $34 billion in new auto-plant investments and $23 billion in added auto-parts purchases.
Current auto industry employment is about 999,000, according to the Bureau of Labor Statistics.
The commission's study comes after a recent International Monetary Fund study cast doubt on the new agreement's effectiveness, saying it would reduce trade among the three North American neighbors and have a "negligible" effect on economic output.
"The new rules lead to a decline in the production of vehicles and parts in all three North American countries, with shifts toward greater sourcing of both vehicles and parts from outside of the region," the International Monetary Fund paper said.
The deal also would have no impact on inflation-adjusted wages in the U.S. or Canada while resulting in a slight decline for Mexican workers. Consumers also would face higher prices and thus buy fewer vehicles, the study said.
A senior official in the Office of the U.S. Trade Representative denigrated the fund's study as reflecting merely the "opinions" of its authors. The more favorable trade representative's conclusions were derived from confidential business plans that major automakers submitted to the government, which were more reliable than economic modeling, said the official, who briefed reporters on condition of anonymity.
"We have unique insights," the official added.
Information for this article was contributed by David J. Lynch of The Washington Post and by Paul Wiseman of The Associated Press.
Business on 04/19/2019