Amid the U.S. government’s largest partial shutdown, issues like border protection have taken center stage. However, our global trade policy remains a critical, yet underdiscussed agenda item that impacts our jobs and economy at large. The United States-Mexico-Canada Agreement needs to remain top of mind as an enabler of much needed stability and confidence to corporations and supply chains throughout a region that enjoys $1.2 trillion in trade impacting half a billion consumers. When NAFTA was originally conceived, our regional economy was not based on continuous access to data, life enhancing digital services, and connected “smart” devices. The World Wide Web was in its infancy and what is known today as “IoT”, or the Internet of Things, was something reserved for Sci-Fi novels.
Today, however, digital products and services help ensure a more energy efficient and resilient grid, allow for improved agriculture production, and facilitate data driven health care services and improved patient outcomes. According to the World Trade Organization, digital trade accounted for $27.7 trillion in 2016, up 46 percent from 2012. It is imperative that our national and international agreements reflect this new digital complexity. At Schneider Electric, we support the ratification of the USMCA because it provides a regional and international framework for the facilitation of successful digital trade.
The digital trade chapter, which did not exist under NAFTA, serves as a key new strength of the USMCA. It balances national interests with regional economic progress while rejecting digital protectionist policies like data localization that do nothing to enhance the security and privacy of data and only hurt consumers.
Specifically, the USMCA does the following for businesses:
- Prohibits customs duties fees on digital products, thereby reducing unnecessary costs on digital trade.
- Enables the free flow of cross-border data by expressly prohibiting data localization laws, thereby eliminating needless barriers to data access.
- Acknowledges that risk-based and consensus-driven cybersecurity approaches are more effective at combatting digital threats than prescriptive, mandatory regulatory regimes that, unfortunately, are emerging throughout the world.
- Enhances the privacy of personal data by encouraging each nation to adopt and maintain a legal framework that provides for the protection of personal data. In calling for compatibility between these frameworks, the three nations commit to reducing unnecessary regulatory burdens on industry, especially small and medium-sized businesses.
- Preserves corporate innovation by expressly prohibiting source code transfers as a condition for import, distribution, sale, or use, as well as ensuring robust patent lifespans and protections against counterfeit products. These provisions will allow companies to thrive in the North American market without the threat of forfeiting their core innovations.
Critics suggest the USMCA does not do enough to safeguard citizens from cybersecurity and privacy threats. This is not the role of international trade agreements. These agreements provide a framework for the facilitation of trade. The USMCA is quite clear that it places the responsibility for creating and maintaining specific cybersecurity and privacy rules on each nation while promoting collaboration and interoperability.
Furthermore, by providing stability and predictability to global supply chains, the USMCA will serve as an alternative to less stable regions, making timely passage important for recognizing immediate economic advantages. Given today’s fluctuations in trade relations, all companies stand to gain from the greater certainty and predictability that a finalized USMCA can bring. A final agreement will help businesses throughout the world make informed decisions around capital expenditures, global supply chains, and strategic investments.
As each country navigates the domestic political realities of ratifying a regional trade agreement, Schneider Electric wants to emphasize the immense value the USMCA can bring to the regional and global economies by serving as a cornerstone for free and fair trade in the digital era. I encourage members of Congress to prioritize ratifying the USMCA and trust that Mexico and Canada will soon provide their support.
Clayton is CEO & President Schneider Electric North America.