The first round of the renegotiation of the North American Free Trade Agreement is underway. It’s put up or shut up time for a US administration that says it wants to reach at least a 3 percent economic growth rate.
The path to growth is clear: Ensure open, tariff-free foreign markets for US manufacturers while promoting competition and consumer choice in the domestic market that puts downward pressure on the cost of living.
The path to stagnation is equally clear: Pursue a tariff policy that results in a tit for tat with Canada and Mexico that makes US products uncompetitive and that results in a backdoor tax increase on the American people.
The US business community is speaking with one voice. Job creators know what an updated NAFTA should look like. The administration should pay attention.
But at the outset of the negotiations, United States Trade Representative Robert Lighthizer’s rhetoric has already hit a sour note. Taking a page from the Trump script, he said that NAFTA has “fundamentally failed many Americans,” cost us hundreds of thousands of jobs, and that our focus should be on reducing trade deficits.
Enough already with the tough talk and loose facts.
The Canadian negotiator, Foreign Minister Chrystia Freeland, said that her country doesn’t view trade deficits or surpluses as the best indicator of whether a trade deal is working.
She’s right. Would the president prefer that we limit imports and decrease options on store shelves? Americans’ net per capita income is north of $40,000 annually; Mexico’s is about $13,000. Would the president prefer to reduce American shoppers’ buying power? If we want to sell more US-made goods in Mexico, it’s a much better idea to pursue policies that helpstrengthen our neighbor’s economy.
Thankfully, the Mexican and Canadian negotiators have struck a more upbeat tone, pointing out the three countries’ close economic ties and friendship.
Mexico’s lead negotiator, Economy Minister Ildefonso Guajardo, knows that a revamped NAFTA can – and should – be a win-win-win. “For a deal to be successful it has to work for all parties involved, otherwise it’s not a deal,” he said.
So, as negotiators from all three countries sit down to hash out a new NAFTA, the US should dump the bluster and instead keep these big-ticket items on the front burner:
Embrace the opportunity to modernize NAFTA. The agreement came into force nearly 25 years ago. In 1994, we got onto the Information Superhighway by tying up our landlines and typing in our AOL passwords. We deserve a trade agreement for a broadband world. That means, for example, reaching consensus on electronic commerce, allowing Mexican and Canadian consumers to purchase a greater dollar value from sites like Amazon before being hit with a duty.
Move quickly. Markets don’t like uncertainty. All three countries need to move quickly and stick to their agreed to negotiating schedule so that businesses can plan future operations. And despite his penchant for the dramatic, the president and his team should cool off the threats over exiting the agreement. There’s too much at stake in an agreement that is tied to nearly 15 million US jobs to use negotiations as a chance to play chicken with our friends and largest trade partners.
Keep all three countries at the table. The president says he doesn’t like multi-party trade deals and would prefer to negotiate bilateral agreements. Sorry, Mr. President, but that train left the station in the early 1990s when we negotiated the first iteration of NAFTA. Our manufacturers’ supply chains now are too highly integrated across our northern and southern borders to think that we can negotiate separately and emerge stronger. It won’t happen. Cue up the Sister Sledge, because we are family when it comes to trade. Attempting to cut side deals with Canada and Mexico would only hurt us.
A chance to simplify customs regulations. The administration has smartly made the reduction of the private sector’s regulatory burdens a major element of its domestic policy agenda. The renegotiation of NAFTA presents a chance to direct that same red-tape-cutting energy into the trade sphere, ensuring that transactions between the US, Canada, and Mexico are faster, cheaper, and more efficient.
A visa policy for the 21st century. NAFTA 2.0 should acknowledge that we live in a mobile world, where professionals can ply their skills around the globe almost as easily as they can around the block. The NAFTA Professional (TN) visa that was created back in 1994 should be updated to ensure it aligns with today’s economy and recognizes industries that weren’t even around when the original deal was born.
A NAFTA for today’s economy. The next NAFTA should be updated to reflect the myriad changes that have taken place since the agreement first came into force. The renegotiation presents an opportunity to allow service providers – financial and insurance, for example – to reach customers across the border with as few bureaucratic hurdles as possible.
The energy sector looks much different, too. The cross-border transmission of all types of power should be on the table.
And today’s economy is driven by ideas and innovation. The updated NAFTA should ensure that intellectual property is protected, and there should be clear, easily navigable dispute resolution systems in place when problems arise.
These are key areas where all three NAFTA countries can emerge with a better agreement. Senator Jeff Flake released his own outline of negotiation recommendations, and Sen. John McCain has reminded the administration about the tremendous economic benefits the agreement has already delivered and that should be expanded upon.
The stakes are high for the US. Will the US knock down barriers to trade, or will it make trade more expensive and more difficult?
If the White House wants to back up its talk of wanting greater levels of economic growth than what occurred under the last administration, the choice is obvious.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry