After autos and auto parts, energy commodities are the largest category of traded goods in North America. The energy industry in North America is both highly integrated and interdependent. As a region, we have achieved energy self-sufficiency and have become a global energy powerhouse because we trade with one another.
Many important developments in the region’s energy market have reshaped the industry. The NAFTA renegotiation may be the chance to move closer to the goal of free trade and investment in the North American energy sector.
The Supreme Court answered this question when it decided that under the Tariff Act of March 3, 1883, tomatoes would be considered a vegetable for the purpose of assessing a customs duty. Who knew the answer would relate to trade policy? And thanks to trade, we eat fresh tomatoes all year round.
As NAFTA negotiations get underway, the United States and Canada face a challenging mix of issues. Some represent longstanding disputes between the two countries. Others may be new priorities for the Trump Administration and untested in trade agreements. Still others, like commitments to facilitate digital trade, both sides are ready to agree. Here’s your cheat sheet.
A NAFTA negotiation could address the “microeconomic” factors that affect trade flows would increase the level of trade between the United States and Mexico and make U.S. consumers better off, but it wouldn’t have much effect on the balance of trade. On the other hand, economic growth in Mexico would achieve that effect by stimulating demand for more U.S. products.
In 1994 – the year NAFTA went into effect – the Internet was still accessed through dial-up. Amazon, Google, and eBay were years away, while Facebook and the iPhone were a decade off. As the United States, Canada, and Mexico prepare to rethink NAFTA, they have an opportunity to write rules for digital trade, protecting North America’s lead as a digital pioneer.
As the President engages with Congress, the public, and his Mexican and Canadian counterparts to renegotiate NAFTA, he may find it useful to consider his own 11-step formula for success. Step two: “Protect the downside, and the upside will take care of itself.”
President-elect Trump is already marching through his first 100-day agenda. Near the top of that list is withdrawing from NAFTA—or re-negotiating it. He should work with Mexico and Canada to create a North American Infrastructure Bank instead of re-opening an outdated NAFTA agenda.
Last year, real estate research group Zillow determined that homes located within a quarter-mile of a Starbucks coffee shop increased in value by 96 percent. Starbucks is a premium brand. So is North America. We’re lucky in the United States because Canada and Mexico are the kind of neighbors that increase our value.
Every trade negotiation is an exercise in pushing the government-imposed cronyism out of the way and freeing up space for markets to work, which is good for consumers and for economic freedom.