President Donald Trump once again sent shockwaves this week by threatening to walk away from the North American Free Agreement.
After leading elected officials and business leaders signaled their vigorous opposition, he changed his mind, opting to renegotiate the deal instead.
Trump has called NAFTA the worst trade deal ever and a disaster. We disagree.
But we strongly agree with former President Ronald Reagan when he said that “America must be an unrelenting advocate of free trade.” Reagan understood that free trade is of vital national security and economic interest to our country.
The nearly quarter-century-old trade deal uniting the U.S., Mexico and Canada has made our continent into a powerhouse economic zone.
Not only has the agreement been a net positive for the country, but it’s been especially so for Arizona, which has seen its exports to Canada and Mexico increase 236 percent over the life of the deal. We’re growing. Arizona is now the country’s 14th-largest state. NAFTA is one reason why.
Arizona leaders get it: Trade matters
Arizona’s elected leaders understand NAFTA’s importance to Arizona’s prosperity.
We and other state business leaders have been proud to stand unified behind Gov. Doug Ducey, Phoenix Mayor Greg Stanton, and Sen. John McCain and Jeff Flake, who have made the case for trade and stronger cross-border relationships, increased cooperation, and a North America trading relationship that benefits all sectors of the economy and all of its citizens.
Arizona’s business community has outstanding ambassadors for cross-border friendship.
When the Phoenix Suns played two games in Mexico City earlier this season, team owner Robert Sarver and head coach Earl Watson were received warmly by the Mexican fans, and they spoke eloquently of their fondness for the Mexican culture and their desire to see the NBA continue to grow south of the border.
We remain optimistic that with the help of a united and engaged business community, we can impress upon the Trump administration that a renegotiated NAFTA will be a win-win-win.
Trump’s tax would hurt Arizona jobs
We know that the United States wins with trade because it creates more opportunities for U.S.-made goods to compete in international markets, and because it puts downward pressure on the cost of living for Americans through increased competition on store shelves and greater consumer choice, on everything from tequila to refrigerators.
If the administration wants to enter a NAFTA renegotiation to implement new tariffs – taxes on imported goods that get passed on to American consumers – then it risks doing tremendous damage to the U.S. economy and to the approximately 100,000 Arizona jobs that directly depend on trade.
Protectionism moves us backward. Instead, let’s modernize NAFTA to ensure it reflects an economy that is much different than it was in 1994.
Much of the anti-trade rhetoric ignores the fact that building economic capacity and infrastructure raises the quality of life of its participants, and it alleviates the pressure for people to emigrate due to economic necessity.
NAFTA isn’t just worth preserving, it’s worth strengthening. If we build on what already works, then the pressures on border enforcement, international aid, environmental concerns, and national security lessen significantly.
If you hurt one country, you hurt all three
No country in the world has better neighbors than the U.S. does in Mexico and Canada. Both are free-market democracies that share our values. With a world on fire in places like North Korea and Syria, we should never take our friends for granted.
So, while the administration has a stated preference to negotiate bilateral trade deals, and while such an approach could make sense with certain allies like England and Japan, it’s not advisable to do that with Mexico and Canada. The decades long trilateral agreement with our friends has resulted in supply chains so integrated, that unraveling them would be harmful for all three economies.
That integration can be seen here in Arizona.
Lucid Motors’ announcement earlier this year of an over $700 million capital investment in Pinal County for an electric car manufacturing site was directly tied to the county’s proximity to Sonora and the efficiencies an integrated supply chain affords. It’s expected to result in over 2,000 new jobs.
Mexico is our state’s largest export market and it’s our largest source of international visitors. Canada is our second largest trading partner and number one when it comes to foreign direct investment.
How to make NAFTA great again
The world has changed a lot in the last 23 years, but NAFTA is the same as it ever was. So, let’s make NAFTA great again.
The original NAFTA that was negotiated in the dial-up age should now include provisions to streamline cross-border e-commerce transactions, and it should protect the intellectual property of North America’s innovators. Doing so will make the entire region more competitive, especially in comparison to places like China, where intellectual property protections fall short.
Energy is another sector where an updated NAFTA can better link the three partner nations and improve the lives of its citizens. Mexico’s energy sector today is no longer controlled by state-run oil monopoly.
UNS Energy, that Canadian-owned parent company to Tucson Electric Power, is preparing a new 150-megawatt interconnection that would connect the U.S. electric grid in southern Arizona with electric facilities in northwestern Mexico.
These developments are important. Better to promote North American energy independence than to be reliant on crude from the Middle East and places like Venezuela.
Let’s fix the border bottlenecks
We can also work together to improve our sagging infrastructure. Much of the brick and mortar along the U.S.-Mexico border is at pre-NAFTA quality. U.S. Customs and Border Protection (US CBP) reports that it would take a $6 billion investment to bring the nation’s land border port of entry infrastructure up to today’s standards.
But a new NAFTA could promote greater cross-border cooperation to alleviate congestion and bottlenecks on both sides of the border by facilitating the construction of shared port campuses and joint investments in the access roads leading to and from the border, as well as the completion of Interstate 11.
Cargo inspections could be modernized, too, by expanding on the pilot projects like the one in Nogales where US CBP and Mexican customs personnel inspect trucks together, resulting in an average processing time of only 24 minutes. Before the unified cargo inspection program, trucks would wait at the border for hours.
And we should look to facilitate travel the same way we facilitate cargo.
There are more areas that could be reflected in a NAFTA 2.0, including financial services, telecommunications, health care and academia.
Above all: Make trade faster, simpler
If we’re going to envision what a NAFTA might look like for its second 25 years, let’s not get wrapped up in who’s winning and who’s losing. NAFTA has been – and should continue to be – about addition, not subtraction.
When Arizona cotton is sold to textile manufacturers, is turned into denim jeans in Mexico and then sold to American consumers, who’s losing?
Not the cotton farmer.
Not the Mexican manufacturer, who can easily access source materials close to home
And not consumers, who can get the product they want for a fair price.
The next NAFTA should make these transactions, which occur by the thousands every month, faster and less complicated.
Just as Ronald Reagan ended the threat of communism as a global threat in the 20th century, the Trump administration can usher in a new era of fair and free trade in the 21st century that demonstrates to the rest of the world that we are building a hemisphere with our neighbors and allies that provides prosperity, security, and opportunity.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry. Jaime Molera is co-founder and partner of Molera Alvarez, a Phoenix consulting firm.