NAFTA modernization should improve, not destroy, the pact

Canada, Mexico and the United States are holding the fourth round of negotiations on updating the North American Free Trade Agreement. Most agree that this will be a critical round as most, if not all, of the proposals to modernize the agreement will be put on the table. This could be a make or break round for the future of the agreement.

With that in mind, it is important to note that the U.S. retail industry, along with a majority of the business and agricultural community, support the goal of modernizing NAFTA after more than 20 years. The agreement must be updated to reflect global value chains that exist in today’s marketplace that support millions of U.S. jobs in manufacturing, services, retail and agriculture. Retail alone represents 42 million working Americans, with close to 7 million retail jobs directly or indirectly related to trade.

{mosads}Entire industries and methods of conducting business have been created since NAFTA was first negotiated and implemented, including digital trade. A modernized NAFTA would be a great opportunity to include provisions to eliminate digital trade barriers in order to benefit businesses of all sizes, most importantly small businesses. Improving customs procedures for both trade facilitation and enforcement are also key to not only breaking down barriers but also ensuring proper enforcement of the agreement.

While we support modernizing the agreement, we are concerned that some of the proposals the United States has or will put forward move away from the “do no harm” mantra touted by the administration and supported by the business community. A true modernization of NAFTA should push the agreement forward to address today’s environment as well as the future. Unfortunately, many key proposals seem to look backward and may end up doing more harm than good.

Continuing to threaten to withdraw from the agreement or to include some kind of “sunset” provision should be a nonstarter. An end to NAFTA would not lead to a rush of jobs back to the United States. It would have the opposite impact, negatively impacting the U.S. economy, particularly U.S. companies that have used the provisions of NAFTA to build North American value chains.

The same could be said for including new restrictive rules of origin, new trade remedies or the elimination of investor protections. These could all lead to businesses looking elsewhere for investment. Most importantly, a flawed NAFTA modernization could significantly impact U.S. consumers by increasing prices and limiting the choice and availability of products ranging from apparel and electronics to fresh fruits and vegetables.

We continue to believe that NAFTA has been a positive free trade agreement that has benefited U.S. businesses from retail to manufacturing to agriculture, and more importantly, U.S. workers and consumers. We continue to urge the administration to seek a modernized NAFTA that will continue to provide benefits to all stakeholders while recognizing today’s value chains and the potential for the future.

Matthew Shay is president and CEO of the National Retail Federation.