Reflecting on 20 Years of NAFTA
The first day of 2014 marked 20 years to the day of which the North American Free Trade Agreement (NAFTA) was entered into force by the United States, Canada and Mexico. According to the Office of the United States Trade Representative website, NAFTA created the world’s largest free trade area, which now links 450 million people producing $17 trillion worth of goods and services.
To get a better understanding of the impact of NAFTA over the last two decades, we sat down with Transplace Mexico’s managing directors, Troy Ryley and Jose Minarro, to discuss this pivotal agreement, why we’re better off with it and what needs to change.
Q: What would not have happened if there was no NAFTA?
Troy: We’d have a much different world if there were still trade barriers between Canada, Mexico and the U.S. Mexico would not be a preferred country for trade and we would have even more money flowing into Asia, which is a negative for the U.S. I’m a firm believer that what we have done has helped us stabilize and create a much stronger neighbor south of the border.
Q: Troy, can you elaborate on how Mexico is a stronger neighbor to the US?
Troy: First, there is no longer runaway inflation in Mexico. Second, true democracy has been established. In addition, their cash reserves are more stable, and Mexico has a capable military in place – all the things you want in a neighbor, and all helped by this agreement. With NAFTA, Mexico has more stability than they would have had on their own.
Jose: And just to add to what Troy said, we’ve seen companies grow their business in Mexico, which would not have happened without NAFTA. The U.S. has been able to increase its consumer market. For most companies looking to expand and create a bigger client base, moving into Canada and Mexico is their first international experience and really the launching ground.
Q: Do you think concerns with NAFTA like security or compliance have changed?
Troy: First and foremost, NAFTA is a free trade agreement. When we talk about certificates of origin, we always assume it’s NAFTA. It has helped lay the foundation for growth, and it also sends the message to manufacturers and retailers around the world that the U.S., Canada and Mexico want to do business together and are doing business together. Concerns around security increased after Sept. 11th. Yet, because of NAFTA the U.S., Canada and Mexico already had close ties in order to make trade happen. Post Sept. 11th, it’s still easier for the U.S. to work with these two countries because of this agreement.
Jose: Compliance is now something that every single government is pursuing. The world is getting bigger. With NAFTA, we’ve built a 20-year history of working together. It’s a relationship in which we know each other and it helped open up communication. Over time, the perception of NAFTA has changed and it has helped the U.S., Canada and Mexico make importing and exporting easier. Without it, who knows where we’d be today.
Q: Last question, what could be improved about NAFTA?
Troy: I think we need to shoot for a true free trade agreement – one that reduces the teamsters and special interest groups involvement, and cuts back on the many, many limitations that is included within the agreement. If we don’t get smart and quickly overcome internal perceptions and fears so we can truly open up trade, then we will lose our dominance as a major player in the world markets. The model for this is the European Union (EU), which enables most goods, services, money and people to move freely between countries. NAFTA has bigger implications for the U.S. as well as Canada and Mexico – it’s about us competing with the world on a global scale.
Jose: Mexico especially has positioned itself to be a good manufacturer and supplier supporting many different industries by supplying the U.S., Canada and even South American customers. We need to strengthen NAFTA so all three North American countries can assemble as well as consume these goods and services at better prices as compared to those overseas. To add to what Troy was saying, consumers as a group are getting bigger and have more money to buy goods and services, so North America needs to be able to produce more products of our own in order to be globally competitive. Let’s open up this trade agreement so we can better focus on our region and keep growing our economies together.
What changes would you make to NAFTA?