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Update on the US-Mexico-Canada Agreement

January 24, 2020

ITR President Alan Beaulieu discusses the US-Mexico-Canada Agreement and expected effects on the economy.

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ITR Economics' Divider

Transcript by Rev

Alan Beaulieu:
Hi, this is Alan Beaulieu, President of ITR Economics and welcome to today's TrendsTalk. I want to talk to you about NAFTA 2.0 otherwise known as US-MCA, depending on what country you're from. The US Mexico Canada Agreement that replaces the 26 year old NAFTA agreement. I get the question a lot. Is this good for the United States? And the answer is yes. It is good for the United States. It's good for Canada, it's good for Mexico, it's good for the three nations together as we form an ever stronger North American economy. Our economy together is world-leading. We dominate and we have lots of resources and abilities. We have access to labor and physical resources. We have access to capital and energy. It's an amazing part of the world and all three nations will benefit by this increased dependence in cooperation between us all. One of the good things for the three of us is that with the three countries agreeing, it's not agreed to yet in Canada, but they will agree to it after president Trump signs it and sends it up.

There'll be a 75% regional content required on automobiles. That's up from 62.5%. That's good news. That'll help US manufacturers as well as Canadian and Mexico manufacturers. There'll be a new mandate to use North American steel and aluminum for automobiles. It'll strengthen the domestic economies of all three nations. It will take time. This is not going to get rolled out in 2020 and come into immediate full-blown effect in 2021. It'll take years before all the details are understood, before all the implications and applications can be worked out, but in the end it should prove to be a good thing for the economy. So I caution you, it's not all going to be as it's been advertised. It never is. I think there will certainly be improved efficiencies, that there'll be a reduction in redundancies, that we're going to see the digital aspects have a nice place in this new world where everything going digital versus the old methodologies of the old NAFTA.

I think it's going to increase business certainty, which is certainly good for business, but what we're not going to find are some of the promises, well maybe they're not promises, let's put them under the heading of projections. For instance at the federal budget deficit would be cut by $3 billion through 2029. My response to that is bet me. We hear that all the time. Whenever there is a new major piece of legislation, whenever there's a new major thing, it's going to reduce the budget deficit and it's going to reduce the federal deficit and you know as well as I do, the deficit just keeps growing. We haven't seen it cut, we're not going to see it cut. We're just going to see it continue to be spent.

So just kind of take that off the plate if you think that's a good reason to do this. And it's not going to create probably as many jobs as they think. That's usually another over inflated number, but it will create some jobs. It'll create some opportunities. What we really need is some labor to fill those jobs, but that's a different discussion for a different day. Overall, do I like it? Yes. Is it perfect? No, but then again, show me a piece of legislation that is. Thank you. I hope you have a great day. We'll talk to you soon.

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Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.