Prompt ratification of the United States-Mexico-Canada Agreement (USMCA) is critical to North America — and Texas in particular — remaining competitive with producers in Europe and Asia, according to an expert at Rice University’s Baker Institute for Public Policy.
“While (the) USMCA is far from perfect, its approval will maintain most of the advantages of (the) North American Free Trade Agreement (NAFTA) for the continent’s industry, advantages which have generated annual trade of over $1.2 trillion in goods and services,” said David Gantz, the Will Clayton Fellow in Trade and International Economics at the Baker Institute.
The USMCA was signed in late 2018 but has not been ratified by the three countries. According to the U.S. Department of Commerce, Texas exports to Mexico and Canada totaled nearly $116 billion in 2017 — eight times more than its exports to China — and were responsible for more than 910,000 Texas jobs.
When NAFTA was negotiated more than 25 years ago, one of its most important goals in eliminating regional tariffs for “originating” goods was to allow American manufacturers of autos, household appliances, machinery and other products to compete effectively with rivals in the European Union and Japan, South Korea and later China, said Gantz, who is also the Samuel M. Fegtly Professor of Law at the University of Arizona’s James E. Rogers College of Law and director emeritus of its international trade and business law program.
“Producers in Western Europe had lower cost labor available in Eastern Europe; Japan and Korea had lower wage cost labor in China and the ASEAN nations to rely upon in forming efficient supply chains in an increasingly global marketplace,” Gantz said. “With NAFTA, Canadian and American manufacturers acquired and have maintained similar advantages in Mexico.
“A quarter of a century later, the revised and modernized version of NAFTA should be submitted to the Canadian Parliament and U.S. and Mexican congresses as soon as possible to assure that the essential competitiveness of North American business and labor is preserved.”