On Tuesday, U.S. Travel released its findings on the positive impact on travel if the U.S. entered the U.S.-Mexico-Canada Agreement (USMCA), versus the negative effect on travel if the U.S. were to withdraw from the North American Free Trade Agreement (NAFTA) without entering into another trade agreement.
U.S. entry into USMCA
The economic benefits of the U.S. entering into the USMCA would be plentiful. According to the International Trade Commission (ITC), USMCA would raise U.S. real GDP by $68.2 billion and U.S. employment by 176,000 jobs.
When the economy thrives, so does travel. Increasing GDP and employment would create more disposable income, thus allowing Americans more freedom to travel. Based on the figures from ITC, U.S. Travel estimates the USMCA would raise $1.7 billion in travel-generated economic output and create 15,000 jobs.
U.S. withdrawing from NAFTA
Currently, combined visitations from Canada and Mexico are projected to increase 3.0% over the next three years. That positive outlook would be shaken by a withdrawal from NAFTA.
U.S. Travel’s analysis on the impact of free trade agreements (FTA) finds that, on average, FTAs increase the annual growth rate of international arrivals by about three percentage points over the initial three-year period after an FTA went into effect. Assuming this would have a similar negative effect on inbound visitation from Mexico and Canada if the U.S. were to withdraw from NAFTA, U.S. Travel estimates visitations from those countries would remain flat over the next three years. By 2022, there would be three million fewer visitors from Canada and Mexico if the U.S. withdrew from NAFTA today.
The result of this contraction would mean $5 billion less travel-generated output for the U.S. economy and 30,000 fewer American jobs.
Withdrawing from NAFTA without entering into another agreement would have a calamitous effect on inbound travel from Canada and Mexico. Trade wars cause recessions, which is toxic to a healthy travel industry. Travel is one of the first things to suffer in a recession, as businesses and families alike cut back on travel expenses.
In order to keep the economy—and by extension, the travel industry—strong, it is crucial that the U.S. not engage in risky trade wars or downgrade our valuable trade agreements. Given the measurable advantages of USMCA, we support its swift implementation.
ITC used an economy-wide computable general equilibrium model (CGE) to assess the likely impact of USMCA on the U.S. economy and industry sectors.