July | August 2017







Trump Administration Poised to Renegotiate the North American Free Trade Agreement

By Andy Karellas, director of federal affairs, CSG Washington, D.C., Office
During his campaign and first 100 days in office, President Donald Trump has voiced his desire to renegotiate the current free trade agreements, including agreements with the top two markets for U.S. exports—Canada and Mexico—through the North American Free Trade Agreement, or NAFTA.    
NAFTA is a trade agreement between the U.S., Canada and Mexico that entered into force on Jan. 1, 1994. The intent of NAFTA, similar to other trade agreements, is to increase the level of trade and investment between the nations by reducing tariffs, protecting intellectual trade property and reducing other non-tariff barriers. In a press conference on March 10, Wilbur Ross, the recently confirmed secretary of the U.S. Department of Commerce, stated the Trump administration could notify Congress soon on its plan to start formal renegotiations.   
In 2016, the U.S. exported more than $266 billion and $231 billion in goods to Canada and Mexico respectively, making them by far the largest export markets for the states. China is the third market for U.S. goods exports, accounting for roughly $115 billion. In 2016, the U.S. exported more than $2.2 trillion in goods and services, which helped support millions of direct and indirect jobs. Naturally, renegotiations and changes to NAFTA could have a major impact on U.S. businesses and their supply chains. 
“Canada and Mexico are our country’s two largest export markets and both vital destinations for Florida manufactured products,” said Manny Mencia, senior vice president of international trade and development for Enterprise Florida. “I believe it is important for the states to engage and urge the United States Trade Representative and the United States Department of Commerce to ensure that a renegotiation of NAFTA agreements does not disrupt the trade flows between our countries, which could jeopardize thousands of jobs in the U.S.”
Mencia is also the current president of the State International Development Organizations, or SIDO, an affiliate of The Council of State Governments that represents the 50 state international trade offices in Washington, D.C. 
State international trade offices are on the front lines, steering companies to new export opportunities and working to attract investment in their respective states. In addition, they also serve as the primary resource to monitor and communicate trade policy for their respective states. According to the 2016 SIDO survey, more than 80 percent of state international trade offices advise their governor and state legislature on trade policy and how it impacts their state’s economy, including what a renegotiated NAFTA agreement would mean for their businesses. 
“The North American Free Trade Agreement went into effect almost 25 years ago and needs to be updated to reflect new issues and technologies that have emerged since that time,” said Robert Hamilton, the advisor for trade policy for Washington Gov. Jay Inslee. “Of paramount importance are rules governing trade over the internet, provisions that ensure the state-owned enterprises compete on a commercial basis without government support, and stronger enforceable labor and environmental provisions.” He went on to say, “I would encourage the Trump administration to first look at the TPP (Trans-Pacific Partnership) as it contained many provisions that would shape the international trading system in a manner that is advantageous for American workers, farmers and industries.”
Hamilton also serves as the chair of the Intergovernmental Policy Advisory Committee on Trade within the Office of the United States Trade Representative, or USTR. This is the primary advisory committee responsible for providing policy advice on trade policy matters to USTR on behalf of state and local governments. 
Under the formal negotiation process the president must notify congressional committees of jurisdiction of their intent to launch negotiations. That triggers the formal review process, including a 90-day notice for Congress to review and assess the overall economic impact of the trade agreement. To further strengthen the role state governments play in international trade policy, The Council of State Governments and SIDO worked to establish policy requiring stronger outreach and consultation with state and local governments on trade policy within their state. 
As part of the Trade Facilitation and Trade Enforcement Act of 2015, which was implemented last year, federal agencies will work closer with state government officials to fully assess the impact of trade agreements through state outreach and consultation. This is an important step for states to fully assess the possible effects, both positive and negative, for their respective businesses. 
With the majority of the public’s focus on Washington, D.C., state international trade offices are focused on executing their mission to promote exports and help attract investment. 
“At the end of the day, American products are well regarded around the world, and foreign companies want those products,” said David Mathe, export trade director for the state of Delaware and SIDO vice president, when asked about the possible renegotiation of NAFTA. “The U.S. business is focused on finding those markets and building those business relationships. They want to leave the politics to the politicians.” 
Quick Stats: U.S. Trade with Canada and Mexico
According to data from the International Trade Administration, total U.S. goods exports to Canada in 2016 were nearly $266 billion—more than $820 per capita. Three states—Michigan, Ohio and Texas—made up almost a fourth of all exports: $62 billion altogether.
Of the 6.7 million jobs supported by goods exports in 2015, 18.5 percent—or 1.2 million—were supported by exports to Canada.
According to figures from Canada’s embassy, almost 1 in 25 jobs in North Dakota is supported by U.S. trade with Canada. More than 1 in 30 jobs in Maryland, New York, South Carolina, South Dakota and Virginia are supported by U.S. trade in Canada.
U.S. goods exports to Mexico in 2016 totaled $231 billion in 2016, or $713 per capita.
Texas ($92.7 billion), California ($25.3 billion) and Michigan ($12 billion) were the top exporting states to Mexico in 2016.
Of the 6.7 million jobs supported by goods exports in 2015, 14.4 percent—or 968,000—were supported by exports to Mexico.
Mexico’s Ministry of the Economy reports that 565,000 jobs in California, 382,000 jobs in Texas, 322,000 jobs in New York, and 290,000 jobs in Florida depend on trade with Mexico.