Evaluation of the Economic Effects of the USMCA on China by Reducing Technical Barriers

Abstract

First of all, the trade structure and tariff structure analysis of the United States, Mexico and Canada shows that the degree of inter-import and export dependence between the three North American countries is much higher than that of China, and the tariff level of most industrial sectors between the United States, Mexico and Canada is significantly lower than that of China. Further verifying technical trade barriers have become the preferred tool for trade protection in the United States, Mexico and Canada. Then the GTAP simulation is used to quantitatively examine the China’s economic effect changes brought by the reduction of technical trade barriers under the framework of the USMCA agreement. The study results showed that the reduction of technical barriers in the three North American countries would make China's GDP, resident income, resident consumption, social welfare, net return on capital, export and import volume, total output decline, which may also lead to an increase in the foreign trade surplus and international trade frictions; Moreover, with the deepening of the technical barriers in the three North American countries, the negative impact on China's macroeconomic and industrial output will also expand. In addition, China's reducing trade barriers and promoting technological progress can greatly reduce the negative impact of the United States, Mexico and Canada lowering technical barriers to each other on China's macroeconomy, so that China's social welfare, net return on capital, exports, imports, and sectoral output will show positive growth, and can also balance China's trade balance and ease China's foreign trade relations. The simultaneous implementation of these two measures can completely eliminate the negative impact of the technical barriers of the three North American countries on China's macro-economy and industrial economy.