President Donald J. Trump on Friday, August 31 notified Congress of “his intention to enter into a trade agreement with Mexico—and with Canada if it is willing, in a timely manner, to meet the high standards for free, fair, and reciprocal trade contained therein.”
It had been hoped that Canada would have joined the United States and Mexico in reaching a preliminary trilateral free trade agreement in principle, subject to finalization and implementation, to update the 24-year-old North American Free Trade Agreement (NAFTA) that accounts for more than $1 trillion in annual trade with modern provisions representing a 21st century, high-standard agreement. Instead, negotiations with Canada are ongoing.
After Canada was sidelined from the trilateral trade negotiations for more than two months, the three countries were aiming to seal a trade pact by August 31 to allow Mexican President Enrique Peña Nieto to sign it before he leaves office at the end of November.
Many negotiators wanted a deal before the newly elected Mexican president, Andrés Manuel López Obrador, takes office on December 1. This timeline accommodates a 90-day waiting period under U.S. trade law referred to as Trade Promotion Authority before President Trump can sign the pact.
The United States also faces midterm elections in November, and Canadian Prime Minister Justin Trudeau a national one expected by October 2019.
U.S.-Mexico Trade Agreement
As of August 27, the United States and Mexico had reached a preliminary agreement in principle, subject to finalization and implementation, to update the 24-year-old NAFTA with modern provisions representing a 21st century, high-standard agreement.
According to the U.S. Trade Representative (USTR), the updated agreement will support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.
The California Chamber of Commerce looks forward to learning more details of this agreement, and to a completed trilateral free trade agreement including Canada that allows for certainty for all parties involved and follows the path of Trade Promotion Authority.
Per the USTR, the preliminary U.S.-Mexico agreement includes:
• Modernizing NAFTA to be a 21st century trade agreement.
• Rebalancing NAFTA to support manufacturing.
• Strengthening NAFTA for agriculture.
The goals of NAFTA are to eliminate trade barriers and facilitate movement of goods and services across borders, promote fair competition, increase investment opportunities, provide protection and enforcement of intellectual property rights, create procedures for trade disputes, and establish a framework for further trilateral, regional and multilateral cooperation to expand the trade agreement’s benefits.
Since 2017, the CalChamber has been communicating with the Trump administration to support the renegotiation of a modernized NAFTA. Numerous rounds of trilateral negotiations among the United States, Canada and Mexico resulted in agreement on a number of chapters.
On June 12, 2017, the CalChamber submitted comments on “Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement with Canada and Mexico” to the U.S. Trade Representative—with a copy to the California congressional delegation.
The new U.S.-Mexico agreement is written to last for 16 years, but would allow the countries involved to revise or modernize aspects of the deal every six years. The pact would continue for another 16 years after it is revised. Originally, the CalChamber has opposed the proposed five-year sunset clause, as a forced re-examination of the pact on such a short time frame would cause uncertainty for all parties.
The CalChamber understands that the NAFTA was negotiated more than 25 years ago, and, while our economy and businesses have changed considerably over that period, NAFTA has not. We agree with the premise that the United States should seek to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under NAFTA.
The provisions of the NAFTA with Canada and Mexico have been beneficial for U.S. industries, agricultural enterprises, farmers, ranchers, energy companies and automakers. Any renegotiation of NAFTA must recognize the gains achieved and ensure that U.S. trade with Canada and Mexico remains strong and without interruption.
The CalChamber actively supported the creation of the NAFTA among the United States, Canada and Mexico, comprising 489.5 million people with combined annual trade with the United States being around $1.139 trillion in 2017. In 2017, goods exports exceeded $525.46 billion, while goods imports totaled nearly $614.02 billion.
The CalChamber’s longstanding support for NAFTA is based upon an assessment that it serves the employment, trading and environmental interests of California and the United States, as well as Canada and Mexico, and is beneficial to the business community and society as a whole. Since 1993, trade among the three NAFTA countries has nearly quadrupled.
Mexico and Canada are California’s largest and second largest export markets. A successful renegotiation of NAFTA will benefit the California economy and jobs.