Trade talks? NAFTA is a guide

  • Article by: MARK KENNEDY and TIM PENNY
  • Updated: February 18, 2014 - 6:29 PM

Why America needs deals with the Pacific Rim and Europe, and why President Obama needs fast-track authority to approve them.

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Twenty years ago, politicians from both parties worked long and hard to give President Clinton authority to negotiate NAFTA, the free-trade agreement binding the United States, Canada and Mexico. Despite all the dire predictions at the time, NAFTA is now widely viewed as an economic success for all three countries. According to the Chamber of Commerce, U.S. trade with Mexico and Canada has increased 350 percent since 1994, to $1.2 trillion annually.

The United States now is working on a pair of even bigger trade deals — with Europe and Asia. It is essential that today’s lawmakers look to the courage of those who came before them and get these deals done.

Since Congress is once again debating whether to give the president Trade Promotion Authority (TPA, or “fast-track” authority) to negotiate and finalize important trade agreements with the Pacific Rim and Europe, we think it is important to reflect upon the key lessons learned from NAFTA.

The Economic Club of Minnesota recently held a celebration of the 20th anniversary of NAFTA in Washington, D.C. The event brought together senior negotiators from the United States, Canada and Mexico, as well as President Bill Clinton’s chief of staff, Mack McLarty. Canadian Ambassador Gary Doer and Mexican Ambassador Eduardo Medina-Mora also participated to examine the impact of NAFTA and to encourage the United States to continue to play its historic role as a world leader in expanding global markets.

Most important, panelists noted that the naysayers were wrong. NAFTA has created new export opportunities, has streamlined rules to increase efficiency, and has lowered costs for U.S. consumers and companies. North America is now an integrated economic bloc that increases our region’s global competitiveness. Every day the United States conducts $3.2 billion in trade with our two largest customers, Mexico and Canada. Trade with our neighbors supports more than 14 million U.S. jobs. Product components are often made and assembled across borders, using global supply chains. For example, 25 percent of U.S. imports from Canada and 40 percent of imports from Mexico contain value added in the United States.

Second, NAFTA marked the first time developed countries entered into a free-trade agreement with a developing nation. Some bemoaned this “asymmetry” at the time with neocolonialist charges in Mexico and “dumping” worries in the United States. Neither prediction proved true.

Instead, as Mexican negotiator Luis de la Calle noted, NAFTA’s economic strictures were an investment in the country’s political and economic stability. Mexico has become a nation based on the rule of law. The results have been impressive, with steady economic growth, a balanced budget in each of the last 17 years and relatively low inflation.

Third, because NAFTA was so controversial, it required bipartisan leadership and cooperation between the White House and Congress to get it passed. It would not have happened without former Minnesota Republican U.S. Rep. Bill Frenzel’s leadership. Clinton appointed him to serve as special adviser to the president on trade, and Frenzel worked closely with Democrats like McLarty and Bill Daley to ensure that the Republican-controlled Congress supported the president’s trade goals.

Fourth, NAFTA spawned two decades of growth in international trade that lifted millions out of poverty and provided a model for regional trade agreements around the world.

Other regions have witnessed the benefits of free trade and have begun concluding their own agreements. Rather than depending on the United States as a market for their product, they establish alliances to sell goods and services at preferential rates. As the middle class continues to grow in Latin America, Asia and Africa, these regions increasingly will see one another as customers and suppliers. If we want American access to these emerging markets, we need to be part of these trade agreements.

As Mexican Ambassador Mora noted, there are two ideal times to plant a tree: 20 years ago and today. Clinton needed fast-track authority 20 years ago in order to finalize NAFTA, and President Obama needs it today to successfully conclude the Trans-Pacific Partnership (TPP) with 12 nations along the Pacific Rim and the Transatlantic Trade and Investment Partnership (TTIP) with the European Union.

It is an identical fight to the one we had 20 years ago — except this time, we have the benefit of hindsight. We are no longer on the cusp of a global economy. We live in a world where every nation is connected to international markets.

We need to strengthen and streamline our trade alliances as an economic counterweight to China. TPP will present China, India and other emerging economies with model transparency and rule-of-law protections they will need to adopt in order to more fully integrate into the world economy.

Opponents argue that fast-track authority, which ensures that Congress can only vote the agreements up or down without amending them, is unnecessary. They claim that the administration should just negotiate its best deal and bring it to Congress for approval or amendment.

That specious proposal will doom any potential agreement.

With 535 members of the House and Senate, the potential for amendments is almost infinite. Our trading partners will not put their final negotiating positions on the table and risk antagonizing domestic audiences unless they know that they are striking a final deal with the Obama administration.

The world wants us to lead, but it will not wait. It is time for Congress to pass fast-track and give our nation’s economy a much-needed boost. We look forward to another anniversary 20 years from now, when we will celebrate the economic and political gains accomplished through TPP and TTIP.

 

Mark Kennedy is professor and director of the Graduate School of Political Management at George Washington University. Tim Penny is the president of the Southern Minnesota Initiative Foundation. Both are former members of the U.S. House from Minnesota.

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