What to Keep in Mind During NAFTA Renegotiations

One of the critical debates surrounding the original NAFTA negotiations was the impact the treaty would have on U.S. labor markets. Many feared that millions of U.S. jobs would be lost to competition. Labor costs are cheaper in Mexico, so U.S. companies move factories there to take advantage. This idea is what fueled President Trump’s campaign promise to end the treaty altogether, but his stance has changed a little since then.

In April, he, along with the leaders of Mexico and Canada, agreed to renegotiate the pact. A deal will not be reached overnight, and the President continues to warn the foreign leaders of his willingness to terminate the treaty if a fair deal is not struck. The renegotiations, however, provide all three nations with an opportunity to modernize many outdated provisions.   

NAFTA Goals and Benefits

The intended consequences of NAFTA were to bolster economic growth. Initially, the goals and objectives of the treaty were to:

• Eliminate tariffs for certain products;
• Eliminate certain non-tariff barriers;
• Establish standards in areas such as health, safety and industry;
• Expand telecommunications trade;
• Reduce textile and apparel barriers;
• Expand free trade in agriculture;
• Expand trade in financial services;
• Open insurance markets;
• Increase investment opportunities;
• Increase protection of intellectual property rights; and
• Expand the rights of American firms to bid on Mexican and Canadian government procurement contracts.

NAFTA also included side agreements on labor, environmental issues and immigration. Ideally, all three countries would profit through a sharp increase in trade and cross-border investment. The actual results, however, have been somewhat negligible. Specific industries and certain locations throughout the country have taken a hit, but in the aggregate, the U.S. labor market has seen no significant impact. This does not mean, however, that NAFTA is not beneficial. Most economists believe the treaty has benefitted the U.S. economy. Six million U.S. jobs depend on trade with Mexico, and upwards of 14 million jobs rely on trade with Canada and Mexico combined.

NAFTA and Immigration 

The initial NAFTA negotiations did not consider immigration. Preliminary discussions focused on moving goods and services across the border, but failed to realize that this inevitably involves moving the people who trade in those goods and services as well. NAFTA relaxed certain mobility restrictions to provide more flexibility to parties involved in cross-border commerce. The TN and L-1 visa categories were created to help ease this economic transition and provide pathways for qualified employees to cross the border. The TN permits Canadian and Mexican citizens to seek temporary entry in the U.S. to engage in business activities at a professional level. The L-1 permits an employer to transfer an executive, managerial or specialized knowledge employee from an affiliated foreign office to one in the U.S. It also enables an employer to send the same employee to the U.S. for the sole purpose of establishing a new office.

Both visa categories enable cross-border mobility, and this is beneficial to both the U.S. and the employer. Valuable resources are added to the U.S. market at the benefit of foreign business expansion, and TN visas are often used to fill positions in shortage occupations, such as nurses.

Immigration is vital to efficient cross-border commerce, and modern mobility provisions will help facilitate the trade of goods and services between the three countries.