USMCA continues to expand prosperity
By Gerald Schwebel
Three decades ago, visionary leaders from the United States, Canada and Mexico began laying the groundwork for supply chain networks based in North America. Now, more than ever, we need to continue building on that foundation to create a resilient economy that generates greater prosperity and more opportunities for more people.
Following the implementation of the North American Free Trade Agreement (NAFTA) in 1994, trade among the three countries skyrocketed. Just over a decade later in 2006, trade between NAFTA partners had almost tripled, from $304 billion to $903 billion. In a period of increasing international trade dominated by huge trade blocs, NAFTA allowed businesses and workers in the United States, Mexico and Canada to be more competitive on the global stage.
In no area was the integration of the North American economy more successful than in the automobile industry. U.S. exports of automotive vehicles, parts, and engines had grown from $51 billion in 1993 to $163 billion in 2019, with car components manufactured and assembly taking place in all three nations - from Northern Mexico to South Texas on to Michigan and Canada.
Despite the successful example of North American-based supply chains offered by the automotive and other industries, it wasn't until 2020 and the onset of the COVID pandemic that business and political leaders in all three nations realized the full potential, the desirability and the necessity of near-shoring and on-shoring more of our supply chains. From high-tech components to medical supplies, the pandemic exposed the economic and even national security dangers of our dependence on far-flung supply chain networks.
The onset of the pandemic also coincided with the implementation of NAFTA's successor, the United States-Mexico-Canada Agreement, or USMCA. The implementation of USMCA in 2020 brought North American free trade into the 21st Century, with significant enhancements related to agricultural market access, intellectual property, digital trade, financial services, labor and other areas.
However, the work to improve North American economic competitiveness and supply chain reliability continues. Private sector leaders from the three countries - representing the United States Chamber of Commerce, Mexico's Consejo Coordinador Empresarial and the Business Council of Canada - meet regularly to identify policy priorities and share best practices that strengthen economic cooperation and enhance the ability of our three nations to compete in the global marketplace.
At the most recent North American Leaders Summit in Mexico City in January, representatives of the three business groups highlighted three policy areas for their respective governments to prioritize. First, they called on elected leaders in the three countries to continue to align policies that safeguard our shared supply chains and strengthen our preparedness for future disruptions and crisis events.
Second, they highlighted the need to address outstanding issues that have delayed the full implementation of USMCA. One sticking point has been the Mexican government's plan to ban genetically modified corn imports for human consumption. In a letter to President Andrés Manuel López Obrador, President Joe Biden and Prime Minister Justin Trudeau, the leaders wrote: "Compliance with our science-based North American trade commitments will enable us to meet the food needs of our populations and the world, improve our environment and advance the prosperity of the people working in our agriculture-related industries."
Third, the business leaders asked the three governments to preserve a policy environment conducive to business, investment and economic growth. "To achieve this vision of a competitive North American region," they noted in their letter, "it's essential that our governments work together to develop strategies that reinforce the rule of law, ensure business certainty, and adhere to global best practices on transparency, predictability, stability, accountability and due process."
The results of North American economic collaboration, first expressed almost 30 years ago in NAFTA, are undeniable. With a collective market of more than 500 million people and more than $1 trillion in trade, the USMCA partners now account for almost one-third of global economic activity. Nearly half of North American trade is now intra-regional, between the three partner countries.
Driven by the private sector, we must continue to build on this success to enhance North American economic competitiveness, expand prosperity for the residents of our countries and strengthen our efforts to create supply chains that meet our economic and national security interests.
Gerald Schwebel is executive vice president of IBC Bank and was a member of the U.S. Chamber of Commerce delegation to the North American Leaders Summit in Mexico City.