Officials from NAFTA member countries express support for modernized trade deal

A former Canadian prime minister, former Mexican commerce secretary, and former U.S. ambassador to Mexico said during a Senate Foreign Relations Committee hearing that Washington should recognize the benefits the U.S. has gained from the trade deal.

   A former Canadian prime minister, former Mexican commerce secretary, and former U.S. ambassador to Mexico touted the benefits of the North American Free Trade Agreement (NAFTA) Tuesday during a Senate Foreign Relations Committee hearing, saying that Washington should recognize the benefits the U.S. has gained through the trade deal.
   “This is the most successful and peaceful bilateral relationship in world history, and one that must be cherished and enhanced by our leadership in a manner that is thoughtful, understanding and wise,” said Brian Mulroney, who served as Canadian Prime Minister from 1984 to 1993, during U.S.-Canada Free Trade Agreement and NAFTA negotiations.
   Earl Wayne, who served as U.S. ambassador to Mexico from 2011 to 2015, cited in his written testimony to the committee studies showing the U.S. could lose 180,000-3.6 million jobs in the first three to five years after a withdrawal from NAFTA, depending on various scenarios.
   U.S. automobile and agriculture sectors would be the hardest hit in such a situation, as textiles and manufacturing would also sustain noticeable losses, testified Wayne, who is currently a global fellow for the Wilson Center’s Mexico Institute. Studies also show Mexico would be at risk of losing 950,000-10.3 million jobs, while Canada would be at risk of losing 125,000-1.2 million jobs in a post-NAFTA world, he said.      
   The U.S. export decline would range from 2.5 percent to 5 percent, while the nation’s import decline would total between 3.6 percent and 7.5 percent during the first five years after any NAFTA termination, and a Trade Partnership Worldwide study found that the trend would continue long-term, Wayne noted.
   Further, the NAFTA partition helps to incubate North American economic growth in the face of a rising, non-market-driven China, which is more than capable of disrupting outside trade flows, according to the testimony of former Mexican Commerce and Industry Secretary Jaime Serra Puche.
   China’s entry to the World Trade Organization in 2001, along with the Lehman Brothers financial crisis in late 2007 and 2008, stand out as specific obstructions to North American economic growth during the NAFTA era, said Serra, who worked as Mexican commerce secretary from 1988 to 1994.
   It’s important for the U.S. to maintain close NAFTA ties, as China, the U.S.’s largest goods trading partner outside of the multinational EU, relies much less on trade with the U.S. than Mexico, for instance, he said.
   Four cents of every $1 that China exports to the U.S. compose American inputs, while $0.40 of every $1 Mexico exports to the U.S. compose American inputs, Serra said.
   These statistics show that the U.S.-Mexico trade relationship largely hinges on production sharing and that the U.S.-China economic relationship has, at least in part, been spurred by “pure outsourcing” of production from the U.S. over the years, he said.
   “Our three nations are not only buying and selling products and services from/to each other, but are also producing them jointly,” Serra said.
   Amid this backdrop, any tariff raise – whose potential has been implied through repeated threats by President Trump to withdraw from NAFTA – would raise North American production costs “dramatically,” he said.
   For competitive purposes, it’s important to maintain the regional advantages of a tariff-free NAFTA while outside countries face the time and monetary costs of choosing the lowest most-favored nation tariff to enter their goods into the North American market, Serra said.
   There’s room to “increase” North American rules of origin to make the region more competitive, but not to the point of a domestic content requirement, such as a U.S. proposal to require 50 percent U.S. content in automobiles, he said.
   “The concept of having national rules of origin, that is a complication, because that is not exactly what the rule of origin is,” Serra said. “The domestic content requirement goes against the sheer definition of the rule of origin.”
   Serra and Sen. Jim Risch, R-Idaho, used a “scrambled egg” metaphor to describe regional integration built through NAFTA that cannot be unscrambled.
   In addition to benefits for tangible goods, an updated NAFTA should provide intellectual property protection, at least at the level provided by U.S. law, Sen. Chris Coons, D-Del., said.
   Serra agreed that the renegotiation should take IP into account, and Wayne also agreed with Coons that talks should address cybersecurity in some form.
   Despite President Trump’s threats over the past year to withdraw from NAFTA, committee Chairman Bob Corker, R-Tenn., said he believes “modernization is where the administration is heading.”