On August 16th, the United States, Mexico, and Canada will begin the renegotiation of the 23 year old North American Free Trade Agreement (NAFTA). The goal is to complete the renegotiation process by the end of the year. During this process, all three governments, with input from the business sector, will hammer out a deal that addresses a number of issues such as agricultural market access and e-commerce. This blog post discusses the results of NAFTA in each of these areas, how the re-negotiation will modernize the agreement, and each country’s publicly stated negotiating objectives.
Agricultural Market Access – Agriculture has been a controversial issue, as exemplified by opposition to NAFTA by Mexican farmers who have criticized the agreement for negatively affecting their livelihood and increasing dependence on U.S. processed food imports. Small-scale U.S. and Canadian farmers have also expressed concern about NAFTA benefiting mainly larger agri-businesses and the difficulty of competing against lower cost imports. U.S. proponents of the NAFTA agricultural chapter point to the fact that U.S. farm exports to Canada and Mexico have increased. For instance, according GRIIT’s analysis of U.S. government trade statistics, U.S. agricultural and livestock product exports to Canada and Mexico combined have doubled from US$8.5 billion in 2002 to US$17 billion in 2006. U.S. producers of the same product exports have a US$311 billion surplus with Canada and with Mexico, a US$5 billion deficit.
The United States seeks to continue the duty-free access for agricultural goods traded among the three North American countries. However, the U.S. renegotiation objectives focus on enhancing the NAFTA agricultural chapter through the elimination of non-tariff regulatory trade barriers and creating similar regulations across borders.
According to U.S. reports, Mexico has also expressed an interest in establishing a common set of regulations as they pertain to agriculture (see http://texasfarmbureau.org/document-reportedly-outlines-mexicos-nafta-objectives/ and https://www.reuters.com/article/us-usa-trade-mexico-idUSKBN1AH4VW).
Canada has formed its official negotiating team to establish its negotiating position on this and other matters.
E-commerce – The digital economy was not even an issue during the time that NAFTA was originally signed and implemented. Over two decades later, e-commerce has changed the way that goods and services are provided to both customers and other businesses. Now, businesses can reach overseas markets just by selling online.
Currently, selling duty-free products online to Canadian and Mexican consumers remains restricted. Canadian consumers can purchase up to $20 worth of goods duty-free via e-commerce and Mexican consumers, up to $50 (see GRIIT Newsletter for more).
While an increase on the amount of goods that enter each country via online portals duty-free would benefit those who purchase and sell goods online, some retailers have expressed concern about fierce competition from foreign suppliers, as in the case of the Retail Council of Canada.
The United States and Mexico have made it clear that they intend to modernize NAFTA to enhance their ability to compete in the 21st century international trading environment.
The first round of talks will take place in Washington, D.C.
What are your thoughts about the re-negotiation of NAFTA?
**The issues mentioned in today’s post is not an exhaustive list of the key issues pertaining to the NAFTA renegotiation. The official GRIIT blog, International Trade Examiner, will continue to provide updates on a variety of key issues throughout the negotiation process.
Is there is any related issue that you would like to discuss further? If so, please send your idea, information, or your own guest blog post to us at griit@griit.org.
