It’s time to modernize NAFTA
To reflect realities of this century; implement knowledge from trade agreements three countries have with other nations
On August 16th, the day that NAFTA renegotiation got underway in Washington, D.C., I had the opportunity to speak at the Council of State Governments-West’s annual North American Summit. The Summit brings people together to focus on one of the most important economic relationships in the world: the partnership among Canada, the U.S. and Mexico.
Last year, the U.S. continued to be Canada’s largest merchandise and services trade partner, while Mexico was our third-largest merchandise trade partner. Trilateral trade was valued at almost US$1 trillion, and investment has also increased substantially since NAFTA was implemented in January 1994.
Together, the countries account for more than 25% of the world’s GDP, the collective market is valued at US$21 trillion, and about 480 million consumers. Our economies and supply chains are integrated, and – since NAFTA’s implementation – jobs have been created throughout North America.
Most economists agree that, as trade brings opportunities for countries to focus on their areas of comparative advantage, employment patterns shift. While the overall effect of trade and trade agreements may be positive, job gains occur in some regions and sectors, and job losses in others. That’s one reason why sectors are sometimes provided with transitional assistance.
It is now time to modernize NAFTA to reflect the realities of this century; to implement what’s been learned from trade agreements that the three countries have with other nations, and to include provisions to address issues that didn’t exist nearly 25 years ago, like digital.
About six weeks ago, the U.S. released its objectives for the renegotiation: 170 recommendations under 22 headings. They are a mix of statutory negotiating priorities that the U.S. administration is required to follow, provisions that were included in the Trans-Pacific Partnership agreement from which the U.S. has withdrawn, and policy statements, among other things.
The U.S. renegotiation objectives aren’t really that surprising as they reflect informal discussions that Canadian officials have had with U.S. officials in recent months. These U.S. objectives are the starting point for the renegotiation. Tradeoffs and compromises will be made, but it’s likely that each of the NAFTA countries will have at least one “make or break” issue.
Canadian Foreign Minister, Chrystia Freeland, has outlined Canadian objectives for the renegotiation. She has highlighted the federal government’s support for our supplymanagement systems, and labour and environmental protections.
Political pressures that may exist for a conclusion by December include presidential elections in Mexico in July 2018 and U.S. mid-term elections in November 2018. To meet this deadline, negotiators may have to focus on what analysts have called “the low-hanging fruit.” Only time - in the form of additional rounds of bargaining will tell.
Canada, the U.S. and Mexico must work together in modernizing NAFTA so our three countries can continue to work together in competing against other countries and regions throughout the world. It’s time for us to make what is - in a number of respects - a decent trade agreement, even better.