WASHINGTON – President Trump's new trade deal with Canada and Mexico won't have much of an impact nationwide, but it would give a boost to some industries that are especially important to the Western New York economy.
American auto parts manufacturers and dairy farmers stand to benefit, as do service industries that would find it easier to do cross-border business, according to an independent government analysis released this week that took an in-depth look at Trump's United States-Mexico-Canada Agreement.
The trade deal, which aims to replace the North American Free Trade Agreement, would boost economic growth nationwide by only 0.35 percent, said the 379-page report from the U.S. International Trade Commission.
But 17 percent of the job gains – 29,700 new jobs in total – would come in auto engine and transmission manufacturing facilities, meaning those that benefit could include the General Motors Powertrain Engine plant in the Town of Tonawanda.
Meanwhile, the deal would make it easier for U.S. dairy farmers to sell milk in Canada, chipping away at a protectionist policy that's hurt local dairy farmers in recent years, while making the border more seamless for U.S-based law firms and banks.
“The model estimates that the agreement would likely have a positive impact on all broad industry sectors within the U.S. economy,” the report said. “Manufacturing would experience the largest percentage gains in output, exports, wages, and employment, while in absolute terms, services would experience the largest gains in output and employment.”
The trade deal known as USMCA would have an especially strong impact on the auto industry, the report said. The agreement increases the percentage of content of each vehicle that must be manufactured in North America in order to qualify for trade breaks, and requires that 40 percent of vehicles be made by workers earning at least $16 an hour.
That last provision is designed to steer auto employment away from Mexico, and the trade commission said the move is likely to boost auto parts employment in the United States as well as investment in factories there.
"The model estimates an increase in U.S. investment of $683 million per year to meet new demand for U.S.-produced engines and transmissions," the report said.
The report did not take a close look at how the deal will affect facilities that produce other vehicle components, such as the auto body parts made at Ford's Hamburg Stamping Plant.
Then again, increasing the U.S. content in vehicles will increase manufacturing costs, and consumers will have to pay for it. The commission estimated the deal will boost pickup truck costs by 0.37 percent and the cost of a small car by 1.37 percent, with the price of other new vehicles rising by somewhere in between those two figures.
That means that sales of U.S.-made autos will actually decrease under the deal and that employment at auto assembly plants will drop by about 1,500.
The Trump administration took issue with those figures, producing a competing study claiming that the trade deal would produce 76,000 auto industry jobs in the U.S.
"Information from all the major auto companies confirms that the new USMCA’s rules of origin will achieve this goal," said United States Trade Representative Robert Lighthizer, whose office produced the competing report.
The American Automotive Policy Council, which represents the three U.S.-based auto manufacturers, sided with the administration and its higher estimate of job gains. The Trump administration job projections include all auto parts manufacturers and not just engine and transmission makers, which is what the trade commission's study covers.
“The USMCA will create significant growth in the U.S. auto industry," said Matt Blunt, the auto industry group's president.
The deal also could provide relief for the beleaguered dairy industry in upstate New York and elsewhere.
Farmers in New York – the nation's third-largest dairy producing state – have long complained that the Canadian dairy market operates as a cartel that shuts them out of certain sectors of the market.
But some of those trade barriers would come down under the USMCA. As a result, the trade commission said U.S. dairy exports would increase 7.1 percent under the trade deal, with most of the gains coming in increased sales to Canada as well as a small increase in sales to Mexico, America's largest dairy export market.
"Increased exports to Canada would be driven largely by higher exports of cheese and other milk and cream products," the report said.
That's good news for a troubled industry. The Department of Agriculture recently reported that due to low milk prices, the nation lost an average of seven dairy farms a day in 2018.
"That’s a startling number, and reversing this alarming trend is what we should be discussing," said Jim Mulhern, the president and CEO of the National Milk Producers Federation. "USMCA helps put us on a path to doing that by safeguarding our largest export market and instituting valuable new improvements to dairy trade in North America.”
The report also projects a wide range of benefits for various service industries. American law firms will find it easier to work in Canada and Mexico and can expect their business in those countries to increase as much as 77.7 percent. Courier services will see their cross-border business costs drop by about 1.4 percent, while commercial banks will enjoy a 1.1 percent decline in the cost of cross-border business.
The commission's report is the most substantive yet on the trade deal, which the Trump administration struck last year and which Congress has yet to even begin to consider.
Lighthizer, Trump's trade representative, said he hopes that changes soon.
"This report is an important step forward in gaining congressional approval of the USMCA," he said.