Canadian Government Estimates New NAFTA Increases Canadian GDP by 0.25%

A Canadian government analysis of NAFTA's replacement -- known as the Canada-U.S.-Mexico Agreement in that country -- estimates that it will increase Canadian GDP by just under 0.25% over five years. The estimate is based on comparing CUSMA to a withdrawal from NAFTA, not from the present trade deal.

The analysis, released Feb. 26, is part of the discussion in Canada's Parliament as it debates ratifying CUSMA. “The final CUSMA outcome effectively achieved Canada’s overarching objectives by preserving key elements of NAFTA, modernizing and updating the Agreement to support Canada’s access to and integration with the North American economy, providing important stability and predictability with respect to overall market access, and addressing the harmful impacts of U.S. Section 232 tariffs on steel and aluminum, as well as threats of similar tariffs on automobiles and auto parts,” the government said.

It pointed to reduced red tape at the border and improved dispute settlement as the main gains from the NAFTA. “However, the gains will be partially offset by new market access to Canada’s supply-managed sectors and more restrictive rules of origin for automobiles and auto parts that will likely increase auto-part production in North America but also lead to higher production costs,” the analysis said. It's referring to dairy and poultry as places where Canadian producers will lose ground.

The more restrictive rules of origin “will benefit Canada’s steel and aluminum sectors, but that could increase overall production costs and negatively affect competitiveness as compared to non-North American producers,” the analysis said.

It also praised the end of investor-state dispute settlement between the U.S. and Canada, because it said ISDS cases “have, to date, cost Canadian taxpayers more than $275 million in penalties and estimated legal fees.”