3 Ways to Modernize NAFTA

It's time to bring the North American Free Trade Agreement into the digital age.

Amgad Shehata | UPS

Every day, 3 percent of global GDP  – and 6 percent of U.S. GDP –  moves through UPS’s international network. That means we see first-hand what works and what doesn’t when it comes to fueling cross-border commerce.

As the U.S. administration looks at ways to modernize the North American Free Trade Agreement (NAFTA) in the coming months, we recognize that  –  though it has created a platform for many U.S. businesses to reach new markets  –  there are ever-widening gaps between the commitments in NAFTA and the demands of modern, cross-border trade.

E-commerce, in particular, is a growing phenomenon that should play a considerable role in informing the future blueprint for North American commerce and customs rules.

In 2016, global e-commerce reached nearly $2 trillion, of which North America constituted $423 billion –  more than the total value of all U.S. exports to Canada in 2016.

For each of the last several years, e-commerce has consistently grown above 14 percent, meaning that American businesses, particularly small and medium-sized enterprises, have much to gain by making it easier to move goods between the United States and our two largest commercial partners and export markets.

A modernized NAFTA can contribute to a comprehensive competitiveness strategy for America.The e-commerce ecosystem depends on important commercial players such as search engines, retail websites, online marketplaces for entrepreneurs, financial services providers and express delivery companies.

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Ideally, these services combine to form a seamless, end-to-end experience for the seller and any consumer making a purchase online.

This seamlessness is even more critical when it comes to cross-border e-commerce because the system depends on countries’ embracing rules and regulations that foster the harmonious operation of all elements, not merely the logistics of moving goods into Canada or Mexico.

With this larger picture in mind, UPS recommends modernization of NAFTA within three critical areas:

1. Market Access : We must safeguard U.S. businesses’ access to Canadian and Mexican markets, particularly to facilitate seamless end-to-end shipments to drive U.S. exports. Recent restrictive import efforts by Mexico — in addition to already cumbersome and inefficient border processes — penalize U.S. exporters. Adding unnecessary cost and time-in-transit due to inefficient and outdated border processes hampers the export growth of American-produced goods. The U.S. administration should ensure that Mexico commits to policy changes that create a modern and efficient import/export process that provides a level playing field for U.S. exporters.

2. Customs Modernization : Regulatory coherence is the cornerstone of an efficient North American supply chain. The U.S. should partner with Mexico and Canada to ensure that all countries undertake ambitioustrade facilitation policy commitments in the 2017 ratified World Trade Organization Trade Facilitation Agreement and the World Customs Organization Revised Kyoto Convention. Additionally, the U.S., Canada and Mexico need to align all electronic platforms for import/export processing. The general digitalization of the customs documentation and processing is key to modernizing existing NAFTA practices, allowing for the swift clearance of U.S. exports.

3. Security : Ensuring secure and safe trade should be a top NAFTA modernization priority. We need to strengthen national security by pushing the border as close to the origin of a shipment as possible and make certain that shipments are evaluated and pre-arrival data is sent from the origin country before the goods reach U.S. soil. We need to move toward an “inspected once, cleared twice” ideal, where a shipment is examined by the “entry” country and is accepted as cleared by its neighbor.

With improvement in these three areas, a modernized NAFTA can contribute to a comprehensive competitiveness strategy for American exports, workers and businesses. UPS hopes the administration considers these recommendations as it works with our partner countries to design the future of NAFTA.

We look forward to working with the administration and other key stakeholders throughout the course of the negotiations in the hopes of reaching a modernized final agreement as soon as possible.

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Amgad Shehata is a Senior Vice President of UPS International Public Affairs and based in Washington DC.

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