New legislation calls for key changes to be made to NAFTA

During the Presidential campaign and subsequently since being elected President, Donald Trump has been very clear that he is no fan of the North American Free Trade Agreement among the United States, Mexico, and Canada.

President Trump has repeatedly stated that he views NAFTA as a failure while adding he prefers bilateral trade agreements instead of multinational deal-based ones. But putting his preferences aside for a moment, there are many transportation and logistics stakeholders that will not hesitate to tell you that NAFTA has its merits and been key in promoting cross-border trade activity between the U.S. and its northern and southern border neighbors.

How so? Consider these data points. For one, NAFTA eases trade among 450 million people in the U.S., Canada, and Mexico, with NAFTA trade more than quadrupling in 20 years and, in turn, boosting the economies of each country. And according to U.S. Chamber of Commerce data, nearly 14 million U.S jobs depend on trade with Canada and Mexico, coupled with separate data from the Peterson Institute stating that NAFTA makes the U.S. $127 billion richer each year.    

While these are noteworthy statistics to be sure, there are other schools of thought that suggest NAFTA is not all it is cracked up to be, with NAFTA leading to a loss of jobs and lower U.S. wages, causing increased environmental pollution in Mexico, and that it will lead to the privatization of education, health care, energy and water, among other reasons.

For these reasons and others, a House effort introduced this week looks to revamp key principles of NAFTA in the form of introduced legislation entitled a “Blueprint for America’s New Trade Policy.”

Led by Reps. Debbie Dingell (D-Michigan) and Peter Defazio (D-Oregon), some of the key components of this legislation for a replacement, or reset, of NAFTA, include:

• requiring strong rules of origin for cars and auto parts;
• requiring strong labor & environmental standards—and ensure they are enforced;
• adding strict, enforceable disciplines to fight against currency manipulation;
• eliminating procurement provisions that undermine Buy America;
• requiring imports and foreign companies operating in the U.S. to adhere to U.S. laws
• lower the cost of prescription drugs;
• end tribunals that Undermine U.S. Trade Enforcement Laws, Such as NAFTA’s Chapter 19;
• requiring foreign operators to comply with U.S. transportation laws;
• requiring strong rules of origin on cars, auto parts, and other manufactured goods;
• eliminating the dangerous ISDS provision that undermines U.S. sovereignty; and
• protect U.S. Energy Policy

And DeFazio’s office said the resolution “directs President Trump to initiate the renegotiation of NAFTA no later than June 1, 2017. All of the provisions included in the resolution must be agreed to by Mexico, Canada, and the U.S. before the agreement can be approved. If negotiations are not completed and all the provisions outlined in the resolution agreed to within one year of beginning talks, the resolution directs the President to consider withdrawing the U.S. from NAFTA.”

Given the typical slow pace of policy implementation in Washington, which, in recent years, continues to take a back seat to the ostensible theater of partisan bickering, it is currently difficult definitively say what the next steps are and whether or not this bill actually goes anyway. Things could be accelerated in the event the President’s proposed border wall plan takes proposal, but that is not a certainty at this point.

For now, it remains business as usual with NAFTA until we see some actual action or legislative progress occur.