What You Should Know About NAFTA

A continuing series of takeaways from World Trade Day 2018

At World Trade Day on April 10, the Indy Chamber was honored to host senior diplomats from Canada and Mexico, our NAFTA trading partners.

Consul General Douglas George, from the Consulate General of Canada in Detroit, and Consul Luis Franco, from the Consulate of Mexico in Indianapolis, joined us for a dynamic discussion on the North American Free Trade Agreement (NAFTA).

This conversation focused on the future of the agreement and how it benefits all member countries. The message from our partners was clear: do not scrap NAFTA, update it. Each country involved has much at stake, and so does our region. Chief Economic Development Officer Maureen Donohue Krauss of the Indy Chamber’s Indy Partnership team moderated the panel.

Highlights from the talk include:

"NAFTA has become the backbone of the relationship in North America." – Consul Luis Franco

• Canada and Mexico are Indiana’s top two export markets.
• $21 billion a year in trade flows between Indiana and Canada. Canada buys more goods from the Hoosier State than then next five countries combined. In fact, Indiana enjoys a surplus relationship with Canada, selling $13.1 billion in goods and services and purchasing only $7.9 billion. Meanwhile, 30 thousand Hoosier jobs rely on trade with Canada.
• Indiana’s exports to Mexico have increased over 1000 percent in the past ten years, a rate three times higher than that with the rest of the world. More than 80 percent of the products traded, through NAFTA, cross the US-Mexico border.
• Canada, Mexico, and Indiana enjoy a positive cross-border relationship, grounded in mutual respect. Canada and Mexico welcome the relationship and strong business ties.

"We need to modernize and update NAFTA." – Consul General Douglas George

• In the 24 years NAFTA has been in effect, much has changed. E-commerce is noticeably missing in the agreement, as no one could have predicted the tech boom to come.
• Rather than going back and re-litigating the flaws of the original agreement, we should look forward to the next 24 years and plan for the jobs and economy for our children and grandchildren.
• There are some key provisions that negotiators need to get right:

       Rules of origin:

• Rules of origin, or the criteria that determines the national origin of a product, influence companies' decisions on where to create investment. In the auto industry, influences automakers’ decisions on where to produce cars.
• If negotiators don't get this detail correct, rather than having cars produced in Canada or Mexico - the jobs will go to China, and they may never come back.
• It is important to remember that cars produced in North America contain parts and materials from all three nations.

       Sunset provision:

• A proposed sunset provision would require that every five or so years, the countries reconsider the agreement to make sure that it is working for all parties involved. This would require the US Congress to vote each time to keep the agreement in place. Such an arrangement would create uncertainty for business.

 

“We are not competing with each other; we are building things together to compete with the rest of the world. What we need is a win-win-win scenario." – Consul General Douglas George

• It is vital to come to a new, modern agreement that all parties can call a win. Continued prosperity for the United States, Canada, and Mexico will ensure that strong ties formed between the nations remain intact.
• Most importantly, if NAFTA is important to you, make your voices heard.

“The outcome of the current negotiations will lay the groundwork for future regional cooperation in every other area.” – Consul Luis Franco