Economy & Budget

How to modernize NAFTA: First, do no harm


With the Trump administration having served notice of its intention to modernize the North American Free Trade Agreement, the U.S. Trade Representative’s office faces the daunting task of sifting through more than 12,000 submissions from business groups, activists, trade unions and many others seeking to add their two cents to the process.

With public opinion divided over whether NAFTA has been good or bad for the United States, what is the best course to take in pursuing the agreement’s modernization?

{mosads}The overriding principle for the administration should be: First, do no harm. While many may choose not to acknowledge it, America has clearly gained from NAFTA. According to a recent study by the Peterson Institute for International Economics, since the agreement’s implementation, U.S. trade with Canada and Mexico has more than tripled, with a positive impact on U.S. GDP of 0.5 percent, or several billion dollars of added growth per year.


Moreover, the study found that NAFTA did not foster noticeable growth in the overall U.S. trade deficit, and that increased trade with Mexico did not perceptibly raise U.S. unemployment.

In the 20-plus years that have passed since NAFTA went into effect, the world economy has been transformed by technological innovation, huge growth in overseas emerging markets and the emergence of complex global supply chains that change the very nature of what “Made in America” really means.

These are not abstract developments — they have impacted the way we live and work. Think of the iPhone, which, in addition to making our lives easier, more productive and more fun — and despite having “assembled in China” etched on it back — returns more than half its value back into the pockets of American workers and shareholders.

NAFTA needs to be updated in a way that solidifies the gains Americans have reaped from these transformations, while further enhancing our competitiveness. With the administration eager to begin negotiations in earnest later this summer, there is pressure to conclude the agreement quickly. Mexico, too, facing upcoming elections, wants to wrap up negotiations this year. While time is of the essence — global markets hate uncertainty — it is important for the United States to take the time necessary to get things right.

A modernized NAFTA must have the goal of strengthening the ability of America — and the North American region as a whole — to compete more effectively in the global marketplace. To that end, the agreement should remain a single, tripartite undertaking, with high standards that build on existing, interconnected supply chains between businesses. It should create growth that makes the NAFTA countries competitive on the international stage.

An update of NAFTA cannot jeopardize the value the agreement currently creates for companies, workers and consumers in the United States. Duty-free access must remain intact — with duties and quantitative restrictions having been eliminated in 2008, U.S. business must continue to have access to the Canadian and Mexican markets on that basis.

NAFTA has also opened up government contracting in ways that strongly benefit the United States. The agreement’s government procurement provisions should remain in place to benefit the broad array of American exporters to the Canadian and Mexican public sectors.

To take the agreement into the 21st century, we need new rules to address the digital economy, which was in its infancy in the 1990s. A modernized NAFTA must therefore include enforceable provisions liberalizing electronic commerce, telecommunications, digital trade and cross-border data flows. It must also solidify provisions that were merely an afterthought over two decades ago, such as rules ensuring fair treatment for firms competing against state-owned enterprises, as well as labor and environment provisions.

Among the 12,000-plus submissions that the administration is reviewing, there are doubtless many that will plead for special treatment, relief from foreign competition, or the rollback of measures that negatively impact special interests. U.S. negotiators need to take a broad view and resist such efforts to remake NAFTA in a more protectionist mold. As the world’s most innovative and competitive economy, America benefits when barriers are torn down, not when they are put up.

In the end, expanded trade and cross-border commerce with our North American neighbors serves to strengthen not just America’s economy, but also our regional and global leadership. Anything less than a high-standard, 21st-century NAFTA agreement, comprehensively addressing all relevant sectors and issues, would be a disservice to the United States.

The Trump administration should forge ahead with purpose in this NAFTA modernization effort, with an eye toward strengthening the region and securing our place within it. 

Peter M. Robinson is president and CEO of the United States Council for International Business, an independent business advocacy group that was founded in 1945 to promote free trade and help represent U.S. business interests abroad.

The views expressed by contributors are their own and not the views of The Hill. 

Tags Americas Canada economy Economy of North America Effects of NAFTA on Mexico Free trade International trade Mexico NAFTA's effect on United States employment North American Free Trade Agreement

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