President and CEO, Arizona Chamber of Commerce and Industry
Published
February 28, 2018
With negotiations to modernize the North American Free Trade Agreement (NAFTA) entering their seventh round this week, the push and pull of the trade talks is growing more intense.
One hopeful sign is the fact that our elected officials are much better informed about the stakes in the NAFTA negotiations than they were just a few months ago. Governors, Senators, and members of the House of Representatives have been speaking out in favor of modernization — but against withdrawal from the agreement and against the so-called “poison pills” the U.S. administration has proposed.
As a proud Arizonan, I agree with the Governors. A new NAFTA must be built through a practical and business-savvy modernization of the pact, and border states like mine are showing the way.
For the Grand Canyon State, NAFTA means jobs. More than 230,000 Arizona jobs depend on trade with Mexico and Canada. Nearly half (47%) of our exports are destined for customers in Canada and Mexico, generating more than $10 billion in export revenue.
But the potential for growth is even bigger. As Arizona-Mexico Commission President Jessica Pacheco recently explained, airfreight cargo traffic is on the rise, driven by e-commerce growth.
But we aren’t waiting for anyone to open new doors for us: We’re taking action today in ways we think can serve as a model.
Consider the trailblazing project called SkyBridge at Phoenix-Mesa Gateway Airport. Once up and running, it will be the only air cargo platform in the United States where U.S. Customs and Border Protection officials work side-by-side with Mexican officials to clear goods bound for export to Mexico before they are even shipped.
Who stands to benefit? All kinds of businesses that sell their goods and services to Mexico. This includes e-commerce companies, manufacturers, and other commercial interests seeking to more efficiently and cost-effectively export to Mexico — while making it easier and more effective for U.S. officials to carry out proper inspections and safety controls.
When this project is built out, it could mean an additional 17,000 jobs created in Arizona. I recently toured a sister project called SkyPlus in Guanajuato, Mexico, that already supports about 14,000 jobs, so we know it works.
As Governor Doug Ducey stated upon announcing the project in January, “Arizona has forged an incredible relationship with our friends and neighbors in Mexico, and we’re very proud of this latest collaboration to enhance international trade and create more jobs for Arizonans.”
SkyBridge will allow American businesses to capitalize on our skills and savvy as the world’s leading e-commerce nation. By contrast, Mexico’s foray into e-commerce has been slower, with some observers — as I learned on a recent trade mission there — comparing Mexico today to where the United States was in 1999.
Modernizing NAFTA can accelerate these plans. For example, a NAFTA 2.0 agreement should contain new de minimis regulations, which allow low-value goods to enter into a country duty free under a simplified entry process.
Following the U.S. example, Canada and Mexico should commit to increase their de minimisvalue applicable to imports. The de minimislevels in Canada and Mexico are stuck at unreasonably low levels ($20 in Canada and $50 in Mexico), while the U.S. level is set at $800, a commercially meaningful level.
Simplifying customs requirements in this fashion is especially beneficial for smaller exporters. Increasing Canada’s and Mexico’s de minimisvalue would reduce transaction costs for American small and medium-sized businesses, making them more competitive in the Canadian and Mexican markets.
Arizona Representative David Schweikert (R) is on the case. He’s working with colleagues in Congress to make the case to the Administration to prioritize this issue in the NAFTA negotiations.
The U.S. Chamber of Commerce has highlighted the potential impact that a streamlined export process can have. Online portals have dramatically reduced the costs associated with exporting in recent years, allowing very small firms to become exporters with greater ease than ever before.
In fact, exporting has become so commonplace that businesses selling on the Internet almost have to work to not export. According to one study of small businesses, more than 95% of the companies using eBay’s online marketplace export, and they tend to export to 25 or more countries per year. This includes very small businesses with 10 or fewer employees.
Add it all up — initiatives like SkyBridge, establishing commercially meaningful de minimis levels, and the power of the Internet to facilitate e-commerce — and it’s a powerful combination.
In fact, it’s a blueprint for how the United States, Mexico, and Canada can work together to create a win-win-win for job creation and a healthy economy.
