by Mexico’s Trade and NAFTA Office, Washington, D.C.
The modernization of NAFTA is an opportunity to expand its success, address the current challenges, and adapt our integration model to take full advantage of the 21st century economy.
Twenty-three years ago, the United States, Canada, and Mexico embarked on the most ambitious trade agreement of its time, the North American Free Trade Agreement (NAFTA). This landmark agreement became the model for trade negotiations to follow and led to an unprecedented era of economic expansion across the globe.
NAFTA created a free trade area to leverage a vibrant regional market that today encompasses 480 million people and a combined GDP of over $20 trillion—and the three NAFTA partners have certainly benefitted from it. NAFTA’s tariff elimination and clear rules for liberalizing trade in goods, and services, as well as investment flows across the region, have significantly increased intra-regional trade, effectively tripling the trilateral trade to reach $1 trillion last year.
Companies across North America take full advantage of this platform to compete and export to markets worldwide under clear rules that provide certainty to make long-term partnerships and business decisions. The continued success of NAFTA lies in this certainty and the ability to sustain and develop supply chains that operate efficiently across the region, whether in agriculture, manufacturing or services.
More than two decades of strong trade and economic ties between the United States and Mexico under NAFTA have built an effective and efficient supply chain that produces goods for world markets.
Mexico is the third largest trading partner of the United States, after Canada and China. Bilateral trade has increased six-fold, from $80 billion in 1993 to over $525 billion last year, which is one of the most dynamic relations in the exchange of goods and services in the world. Each day, $1.5 billion in products are traded bilaterally.
As a strategic partner, Mexico is the second largest provider of products to the United States, accounting for 13 percent of total U.S. imports. Likewise, Mexico is the second-largest export market for the United States, buying 16 percent of the total U.S. products exported worldwide. U.S. exports to Mexico exceeded $320 billion dollars last year.
This amount is larger than the combined exports made to the BRICS countries (Brazil, Russia, India, China and South Africa) or the four largest economies of the European Union.
NAFTA has enhanced our regional competitiveness, increasing regional value-added content to goods traded and produced in North America. As raw materials and semi-finished products cross the border multiple times, traded products accumulate value-added every time they are exported to each other. Overall, intermediate and capital goods account for 80 percent of the total two-way trade.
Due to the high level of economic integration between the U.S. and Mexico achieved since NAFTA came into force, when Mexico sells a product in the U.S. market, it could potentially be categorized as “Made in North America.” A strong regional supply chain helps U.S. companies remain competitive in the world marketplace by jointly producing goods for worldwide consumption at competitive prices, and by supporting jobs in our countries. According to the Woodrow Wilson International Center for Scholars, nearly five million jobs in the U.S. depend on trade with Mexico.
The trade relationship between Mexico and the United States is strong, but it can be stronger. Both countries must continue to build on the solid foundation for growth established under NAFTA and work together to deepen the economic ties and extend the mutual benefits of the trade relationship.
To that end, the Mexican government, through the Ministry of Economy, conducted an extensive public information-gathering process with the Mexican business community, academia, labor organizations, and individuals, to guide Mexico in defining its objectives for a modernized NAFTA.
Some of the identified goals of the modernization are as follows:
- Strengthening North American competitiveness by maintaining preferential access and non-discriminatory treatment for trade in goods, services, and investment within NAFTA.
- Moving toward an inclusive and responsible regional trade by creating a level playing field for increasing the participation of businesses, in particular small-and-medium-sized enterprises (SMEs), in the regional supply chain.
- Taking advantage of the 21st century economy by capitalizing on synergies in the North American energy market, boosting the digital economy, and promoting the protection of intellectual property, among other innovation-enabling elements.
- Securing certainty for North American trade and investment flows by updating the dispute settlement mechanisms and provisions regarding government procurement, and promoting competition.
The objectives outlined above guide Mexico’s position at the negotiating table, and the negotiation’s outcomes will depend on the balances achieved between the three countries.
To lead these modernization talks, Mexico appointed Kenneth Smith Ramos as chief negotiator, strategically selecting a public servant with over 20 years of experience in trade negotiations.
A 48-year-old trade expert with a Master’s Degree in International Economics from Johns Hopkins University, Smith Ramos leads the day-to-day technical negotiations in the talks between Mexico, the United States, and Canada. Throughout his professional career, he formed part of Mexico’s team that negotiated the pact in the early 1990s, coordinated implementation of NAFTA at the Ministry of Economy, and headed the Trade and NAFTA Office at the Embassy of Mexico in Washington, D.C.
The modernization of NAFTA is an opportunity to expand its success, address the current challenges, and adapt our integration model to take full advantage of the 21st century economy. Mexico is committed to ensuring that NAFTA continues to be a state-ofthe-art instrument that contributes to strengthening North America’s competitiveness.
Mexico is closely working side-by-side during the negotiations with the Mexican business community and with their U.S. customers and supply chain partners to enhance the business relationships that are making North America more competitive in the world economy.
