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NAFTA Changes Could Include Modernization, Expansion, Elimination

Thursday, February 16, 2017
Sandler, Travis & Rosenberg Trade Report

A recent issue brief from a conservative policy think tank discusses three ways that President Trump could improve NAFTA in keeping with his stated aim of encouraging companies to keep manufacturing facilities and jobs in the U.S. In addition to retaining the parts of NAFTA that work, the paper recommends that Trump modernize the agreement to take advantage of new technologies, expand­ it to encompass sectors excluded from the original deal, and eliminate counter­productive provisions that are detrimental to U.S. interests.

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Modernization. Modernizing NAFTA to protect digital transactions would be beneficial in its own right, the paper states, given that about 12 percent of global goods trade is now conducted via e-commerce and that millions of U.S. jobs are associated with digital trade. Specific issues that could be addressed include measures that block cross-border data flows, data localization requirements, traditional customs barriers, measures that undermine the protection of privacy, demands for software code, differing standards for protection of intellectual property, and censorship. Such an approach could also provide a template for future trade agreements, which Congress mandated in 2015 must cover digitally traded goods and services.

Expansion. The paper recommends that NAFTA be expanded to encompass ener­gy and other previously excluded sectors. Mexico has made major strides to open its energy market, the paper notes, and con­stitutional reforms enacted by Mexico in 2013 liber­alized the oil, natural gas, and energy sectors. These reforms should be locked in and expanded.

Elimination. “U.S. trade agreements should be designed to increase economic freedom, not government control,” the paper asserts, but the “inclusion of environmental and labor mandates risks turning trade agreements into supranational regulatory arrange­ments that restrict trade flows instead of freeing them.” The paper thus urges the elimination of NAFTA’s “politically motivated ‘side agreements’” on labor and environmental regulations and other “non-trade issues.”

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