IPC Releases Report on USMCA and the Electronics Industry
The IPC has commissioned a report to provide an independent, informational, and analytical resource that describes the potential impacts of the proposed U.S.-Mexico-Canada Agreement (USMCA) on the U.S. and global electronics industry. This report to be written by Shawn DuBravac, PhD, CFA, president and founder of Avrio Institute (https://avrioinstitute.org), which provides consulting, research and advisory services to clients on topics including digital transformation, business model disruptions, and the pace of technological change.
For more than a dozen years, Dr. DuBravac served as chief economist for the Consumer Technology Association (CTA), the U.S. trade association representing more than 2,000 consumer tech companies.
IPC — Association Connecting Electronics Industries® (www.IPC.org) believes the USMCA is a positive step for the U.S. and North American electronics sector and should be approved by the U.S. Congress and implemented by the Executive Branch at the earliest opportunity.
- Bilateral trade between the United States and its North American counterparts is now six times larger than it was prior to NAFTA. Many electronics companies have leveraged economic integration across North America to maintain and grow their U.S. operations.
- The total value of U.S. electronics trade with Canada and Mexico was $155.5 billion in 2017. Electronics exports are 31 percent of all U.S. exports of manufactured goods, natural resources and energy exports to Mexico, and 18 percent of all U.S. exports of manufactured goods, natural resources and energy exports to Canada.
- Congressional consideration of USMCA comes amidst worldwide turmoil in traditional trade relationships. These uncertainties underscore the importance of passing USMCA, reducing long-term uncertainties in North America, and creating a more conducive environment for physical and human capital investment in the United States, Mexico and Canada.
- The role of intra-firm trade is highly influential in North American cross-border flows. Approximately 78 percent of all electronics imported from Mexico and 47 percent of all electronics exported to Mexico are between parent companies and their affiliates.
- Mexico imports 34 percent of U.S. printed circuit board production, making it not only the largest market for U.S. PCBs, but also larger than the next four largest markets combined.
- Beyond the underlying economics, several specific provisions of USMCA are particularly significant for the electronics industry:
- The overwhelming majority of U.S. electronics companies are small and medium-sized enterprises, which makes the inclusion of an SME chapter significant for the industry.
- Given the growing relationship between the electronics sector and digital services, USMCA’s digital trade chapter could pave the way to unprecedented innovation and investment.
- Protecting intellectual property and trade secrets is fundamental to the success of the electronics industry; USMCA would strengthen IP protection and enforcement.
- USMCA’s sunset clause would create unnecessary uncertainties that could hinder investment.
- Proposed changes in the regional value content requirements for automobiles are a mixed bag.