Why NAFTA Matters

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NAFTA has been getting more and more attention of late and rightfully so, considering how critical it is to business on both sides of the border.


After four rounds of negotiations, important progress has been made in some areas, but there is now a lot of speculation about what might happen next.  As we head into the fifth round of negotiations this week, here’s what you need to know:
 
NAFTA is a success story
 
For starters, let’s understand that NAFTA has been an engine of
 middle class job creation.  Close to 14 million jobs in the U.S. alone depend on NAFTA – 9 million are supported by trade and investment with Canada and another 5 million by trade and investment with Mexico.
 
A wide range of local employers – from fruit and vegetable growers to the makers of everything from processed foods to consumer electronics and scores of products in between – would be hurt without NAFTA.  Tearing up the agreement could mean new tariffs at the border, basically hitting local manufacturers, wholesalers and scrappy international businesses with an unnecessary new cost for selling their products abroad and for buying what they need from Canada and Mexico.  This puts pressure on
payroll.  Not to mention what it would cost consumers.
 
The fortunes of Canada, the US, and Mexico are bound up together.  The amount of trade we do with each other has more than tripled since NAFTA went into effect in 1993.  We buy things from each other to make things together and sell them to the world.  The flow of goods and people between our countries is so immense that a blow to any of our economies will be felt across the border and in our communities.
 
Winner-take-all won’t work
 
There is perhaps no better example of how NAFTA has allowed our companies to make things together than the auto sector.  Parts from all three member countries are used in the assembly of cars in all three countries.  The US recently proposed new rules requiring North American cars to have more US parts. This kind of national content requirement would severely disrupt the supply chains that keep North American-made cars cost-competitive. It would encourage imports from outside North America, jeopardizing tens of thousands of jobs in the US.  
 
This begins to illustrate the trouble with bringing a winner-take-all mentality into a trade negotiation. Yet in rounds three and four of the NAFTA renegotiations, we saw proposals that would turn back the clock on 23 years of predictability,
 openness and collaboration. Heading into the fifth round of negotiations later this month, negotiators must understand that if we don’t all win, we all lose.
 
We can’t let the sun set on NAFTA
 
Business thrives on stability.  So another recent proposal – a sunset clause that would throw NAFTA’s existence into question every 5 years –
is also cause for concern.  A sunset provision would create an unstable environment and introduce tremendous uncertainty into major investment decisions made by major employers in the US, Canada and Mexico.  That’s not good business.
 
Canada’s priorities
 
Canada’s priority remains
making improvements to NAFTA that help create jobs and opportunities for middle class families in all three of our countries.
 
We have a real opportunity to make this agreement better  – to make it more innovative, cut red tape for SMEs, extend its benefits to a greater number of people, and strengthen labor and environmental protections – and this is still achievable.  That’s what our negotiators are working towards.
 
Canada will continue to work for a good deal, not just any deal.  We’ll defend our national interests while making a good agreement even better for all of North America – including employers right here in Southern California.