Protecting and Advancing Free Trade: Principles for Renegotiating NAFTA

By at 1 July, 2017, 8:14 am

Raymond J. Keating-

Small businesses are benefiting from NAFTA, and negotiations should enhance cross-border commerce, while modernizing elements of the agreement, not undermine trade between the countries.

On June 29, I had the opportunity to journey to the U.S. International Trade Commission. The purpose was to testify about U.S. negotiations with Canada and Mexico regarding modernization of the North American Free Trade Agreement (NAFTA).

Speaking to representatives from the United States Trade Representative’s office, the State Department, the Department of the Treasury and the Department of Commerce, I was able to emphasize the tremendous benefits that have been derived from NAFTA, in particular, for small businesses.

As noted in my written testimony as well, I made clear the point that all parties involved in the negotiations need to stay true to free-trade goals and principles of reducing governmental barriers, obstacles and costs that damage entrepreneurs, businesses, workers and consumers.

Next, I pointed to the clear benefits of freer trade with our neighbors to the north and to the south. For example, under NAFTA, U.S. goods exports to Mexico grew by 452.2 percent from 1993 to 2016. That was more than double the growth in U.S. exports to the world.

And then there is the significant role that U.S. small businesses play in trade. With Canada, 83.9 percent of U.S. exporters have fewer than 100 workers, and among U.S. importers, 64.4 percent also have less than 100 employees. As for trade with Mexico, 81.7 percent of exporters have less than 100 workers, and 74.3 percent of importers have less than 100 employees.

For good measure, there has been tremendous growth in the number of U.S. businesses involved with trade under NAFTA. For example, from 1992 to 2015, there was an 81.4 percent increase in the number of U.S. exporters to Canada and a dramatic 365.5 percent increase in those exporting to Mexico.

As for the forthcoming negotiations with Mexico and Canada, the message from myself, as well as others on the panel, was, first, do no harm. That is, don’t increase burdens or costs on individuals and businesses trading among the three nations. I also noted that the purpose for the negotiations must be made clear in order to reduce uncertainty for entrepreneurs and businesses; the focus should be on areas where true updating might be needed, such as relating to e-commerce and intellectual property; and finally, moving quickly would help, again, to reduce uncertainty.

In the end, freer trade is simply about reducing government-imposed barriers – such as tariffs, quotas and onerous regulations – so that individuals and businesses are free to trade with each other. Indeed, it’s critical to keep in mind that trade does not, in fact, occur between nations, but between individuals and businesses. Lowering trade barriers expands opportunity for entrepreneurs, workers, businesses and investors.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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