More Jobs May Result from This Week’s Global Trade Deals

Allen Smith, J.D. By Allen Smith, J.D. January 16, 2020
shipping containers

​Proponents of global trade had a good week: The Senate passed the United States-Mexico-Canada Trade Agreement (USMCA) on Jan. 16 by a vote of 89-10, and the U.S. and China entered a trade deal on Jan. 15.

The U.S. International Trade Commission has estimated that the USMCA, which will replace the North American Free Trade Agreement (NAFTA) will result in 176,000 new U.S. jobs. That's an increase of just 0.12 percent, a modest effect on the $21 trillion U.S. economy, reports The Washington Post. The USMCA has gone to President Donald Trump, who supports it, for his signature.

The USMCA's approval came on the heels of China agreeing to purchase approximately $200 billion of U.S. goods over two years, according to Vox.

We've gathered articles on the trade deals from SHRM Online and trusted outlets.

Estimated Economic Benefits of USMCA

The International Trade Commission estimates that USMCA would raise U.S. real gross domestic product by $68.2 billion or 0.35 percent. U.S. exports to Canada and Mexico would increase by $19.1 billion (5.9 percent) and $14.2 billion (6.7 percent), respectively. U.S. imports from Canada and Mexico would increase by $19.1 billion (4.8 percent) and $12.4 billion (3.8 percent), respectively. The agreement would likely have a positive impact on all broad industry sectors within the U.S. economy, according to the commission. It estimated that workers' wages would rise 0.27 percent as a result of the USMCA, with the most highly educated workers experiencing the largest gains.

(U.S. International Trade Commission)

Differing Views on Agreement

Sen. Mitch McConnell, R-Ky. and majority leader, said that passage of the USMCA was "a major win for Kentucky and all 50 states, a major win for our country [and] a major win for the Trump administration." The agreement was supported by the AFL-CIO, which helped negotiate some pro-labor revisions. Sen. Bernie Sanders, I-Vt., opposed the USMCA, however, at the most recent presidential debate, predicting it would result in the outsourcing of more U.S. jobs, and voted against it. Sen. Elizabeth Warren, D-Mass., supported the agreement, calling it a "modest improvement."

(The Washington Post)

Farmers Will Benefit

The USMCA is particularly good news for farmers. Mexico and Canada bought approximately $38 billion in U.S. farm exports in 2016, up from less than $9 billion in 1993 before NAFTA. Manufacturers have raised concerns, however, about the USMCA's requirement that 75 percent of a car's components be made in North America, up from 62.5 percent under NAFTA. But the USMCA, in the words of an editorial from The Wall Street Journal, "puts to rest Trump's threats to abandon the 1994 agreement and blow up continental trade. That's no small matter."

(The Wall Street Journal, subscription required)

House Easily Passed USMCA

The USMCA sailed through the House of Representatives at the end of last year by a vote of 385-41. "The choice was between no NAFTA, NAFTA or an improved NAFTA. It wasn't a hard-multiple-choice [test]," said Rep. Warren Davidson, R-Ohio. Rep. Lizzie Fletcher, D-Texas, said that the USMCA strengthens NAFTA's labor provisions and is "a true bipartisan accomplishment that sets the standard for future trade agreements." A United States-Mexico rapid-response mechanism will provide for expedited enforcement of labor rights to ensure effective implementation of Mexico's labor reform while respecting Mexico's sovereignty and due process. The deal also includes a requirement that 40 percent to 45 percent of auto content be made by workers earning at least US$16 per hour.

(SHRM Online)

[SHRM members-only toolkit: Introduction to the Global Human Resources Discipline]

China Makes Concessions on Intellectual Property

The trade deal with China, which is being called phase one, cools tensions between the two nations and doubles agricultural purchases to $40 billion. China also made concessions on intellectual property and promised to stop forcing companies to turn over their technology. The deal has some skeptics, however. "I wouldn't call this a trade agreement," said Marc Busch, a professor of international business diplomacy at Georgetown University in Washington, D.C. "It's more of a cessation of hostilities, phase one, coupled with some barter."


Doubling of Exports to China

The deal with China calls for the doubling of exports to China by 2021. China is required to buy at least $77 billion more U.S. goods this year and at least $123 billion more in 2021. In 2017, the U.S. exported $186 billion in goods to China, and in 2019 about $160 billion. Manufacturers would get a big portion of the increase in purchases by China. Under the deal, manufacturing trade would climb this year by $32.9 billion and by $44.8 billion in 2021.

(The Wall Street Journal, subscription required)


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