Here’s How to Modernize NAFTA

As one of the very last to speak in a three-day, 143-witness hearing on NAFTA modernization objectives organized by the Office of the U.S. Trade Representative, my comments on Thursday’s closing panel will be brief. My appearance will come well after the point when everything has been said—but not quite everyone has said it.

However, it is critical for the U.S. Chamber of Commerce to speak out on the top trade issue of the day. As the nation’s largest business organization, the Chamber directly represents hundreds of thousands of companies of every size, every state, and every sector — manufacturers, services, and agriculture.

In fact, we represent the interests of three million companies through our nationwide federation of thousands of state and local chambers of commerce and sectoral associations.

This year’s debate over the NAFTA, with all of its ups and downs, has cast the views of the U.S. business and agriculture communities toward the agreement in stark relief. In my two decades working on trade at the Chamber, I have rarely seen such a broad consensus across our diverse membership.

Here’s the bottom line: Many, many American companies depend on the NAFTA every day. Support for the agreement among the American companies that actually manufacture, provide services, and run farms and ranches across our country is broad and strong — far more so than is widely appreciated.

While modernization of the agreement is a reasonable and achievable goal, many companies regard this discussion with trepidation. They are nervous this process could endanger the market access and rules provided by the agreement that help them to grow and succeed.

For other companies, the Canadian and Mexican markets are incredibly important, even though they may not depend directly on NAFTA rules. For them, however, withdrawing from or curtailing the NAFTA would harm the Canadian and Mexican economies, which in turn would harm these American companies and the workers they employ.

For some sectors, this year’s debate has also exposed benefits from the NAFTA that these firms themselves did not fully appreciate until now.

Consider the oil and gas sector: While Mexico excluded this sector from the NAFTA in the negotiations a quarter century ago, more recent reforms have brought it more fully under the protection of NAFTA rules, generating valuable opportunities for American companies.

You know the song: “Don’t it always seem to go … that you don’t know what you got till it’s gone?”

As a result, the Chamber asks the administration and Congress to proceed with these realities clear in mind.

Let us do no harm. Let us build on the market access and rules we currently enjoy under the NAFTA. To quote House Ways and Means Committee Chairman Kevin Brady, let us proceed “in a manner that retains current benefits in a seamless way that does not disrupt the current agreement.”

We urge the administration to consider the NAFTA’s amendment process, and continue on the path the Administration — to its credit — set forth in its letter of notification to Congress, hewing to the course laid out in the Trade Priorities and Accountability Act of 2015.

Of course, the NAFTA can be improved. We look forward to working with the Administration and Congress toward that goal. In our comments submitted earlier, the Chamber has issued recommendations focusing on the following areas (among others):

• Digital Commerce: Create rules for firms in all sectors of the economy guaranteeing the freedom to move data across borders and prohibiting the forced localization of data.
• Intellectual Property: Secure strong protections for patents, copyrights and related rights, trademarks, designs, and trade secrets as well as strong enforcement tools.
• Agriculture: Seek to eliminate remaining tariff and non-tariff barriers facing U.S. agricultural exports and advance modern, science-based sanitary and phytosanitary standards.
• Customs:Establish high-standard rules for customs procedures with regard to advanced rulings, simplified entry, risk management, single window, e-signatures, self-certification of origin, and commercially meaningful de minimislevels.
• Express Delivery Services:Adopt modern rules addressing pre-arrival clearance, single electronic submission, minimum documentation requirements, expedited release requirements, and a separate process for express shipments.
• State-Owned Enterprises:Establish rules to ensure governments and their state-owned enterprises do not distort competition in the marketplace by guaranteeing regulatory impartiality and requiring that SOE decisions be commercially motivated.
• Competition Policy:Ensure that antitrust investigations are fair, transparent, and based on sound economic analysis.
• Regulatory and Technical Barriers to Trade: Enshrine good regulatory practices in the agreement by endorsing a science- and risk-based approach to regulation as well as transparency, stakeholder consultation, and impact assessments.
• Investment: Expand market access for investors and protect investments by maintaining access to investor-state dispute settlement.
• Procurement: Maintain NAFTA’s guarantee of reciprocal access to procurement markets, which has allowed U.S. firms to win hundreds of millions of dollars’ worth of contracts in Canada and Mexico, supporting thousands of U.S. jobs.
• Rules of Origin: Oppose increases in NAFTA’s already stringent rules of origin, which could backfire by reducing North American content as firms opt to simply pay WTO tariffs, but consider steps to reduce the administrative burden of these rules.

In conclusion, we respectfully ask that U.S. negotiators bear in mind that approximately 14 million American jobs depend on trade with Canada and Mexico.

Assuredly, the NAFTA can be modernized in ways that do not put these millions of U.S. jobs at risk — but rather expands the agreement’s benefits for new parts of America’s 21^st Century economy. This goal is eminently achievable, and the Chamber looks forward to helping realize this objective.

About the authors

John G. Murphy

John Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy and regularly represents the Chamber before Congress, the administration, foreign governments, and the World Trade Organization.

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